Local businesses are pushing for tax relief measures to assist them during the Covid-19-induced crisis, as this could help enhance the prospects of a quick economic recovery after the virus has been contained.
The outbreak of the disease, which was declared a pandemic in March this year, has already crippled economies around the globe due to disruptions to business operations and critical value chains.
There have been notable declines in industrial production and revenues during the first quarter (January-March period) of the year, owing to the national lockdown, which is meant to limit the spread of the virus.
The Zimbabwe National Chamber of Commerce (ZNCC) believes that some businesses would fail to recover after the crisis as their operations have been severely dented.
A recent survey by the business lobby group to assess the impact of the initial 21-day national lockdown indicates that the economy would likely contract, while jobs will be lost.
Government, ZNCC says, should consider tax relief measures, exchange rate management and a downward review of rentals in order to allow companies the much-needed breathing space and recovery time.
In addition to pleading for banks to be given an extension to capitalise their operations, ZNNC also recommends progressively easing from a total lockdown to a partial lockdown.
“Government should consider exempting businesses from paying PAYE (Pay As You Earn) for the month of April given that the month has not been a productive month due to the total lockdown. Government needs to consider temporary removal of employment taxes/levies,” said the ZNCC.
The chamber also contends that relaxing import duty on raw materials up to the end of the year would cushion producers and manage imported inflation as trade has been significantly affected by the pandemic.
Expeditiously paying out all outstanding Value Added Aax (VAT) refunds, which Government has already acceded to, is also expected to give businesses the needed liquidity to boost working capital, while a downward review of the standard VAT rate from 14,5 percent to 13,5 percent will also be essential to stimulate aggregate demand, according to the group.
The report also calls for a zero rate VAT for all essential products like staple foods, soaps, sanitisers, water and electricity during the duration of the pandemic in order to make essential services affordable to consumers.
“There is need to revise downwards the corporate income tax rate from 24 percent to 20 percent. This will enable businesses/companies to have funds, which can be invested back to the businesses to boost the working capital in order to sustain businesses,” ZNCC added.
However, observance of the lockdown has markedly increased the use of e-commerce, especially for financial services.
This has also led to a push for a review of taxes for the telecommunications sector to allow customers to easily access digital services, which are integral to financial inclusion.
Businesses also want the Reserve Bank of Zimbabwe to consider pushing back the capitalisation deadline for banks to the end of the year.
And they also want it to be quoted in local currency as opposed to the United States dollar.
It is believed that a waiver of US$ capitalisation will mean that banks will not be under pressure to get US$30 million required for tier-1 banks by year-end.
For instance, restructuring loans and lowering interest rates is expected to allow businesses to recover by increasing spending.
During a recent online forum organised by business advisory firm Global Renaissance Investments (GRI) to assess impact of Covid-19, economists agreed that governments had to come up with policies that enhance economic recovery after the pandemic.
Most African economies, for instance, are driven by the informal sector, which makes it imperative for policymakers to provide safety nets to targeted groups.
Economist Mr John Robertson said an economy like Zimbabwe can only recover from the pandemic and become self-sufficient if Government implements policies that promote production.
“The crisis should help us to focus on what is needed for us to be self-sufficient. We have the necessary skills, resources, knowledge and money that banks can lend to corporate and individuals to boost production.”
Zimbabwe Investment and Development Agency (ZIDA) chairperson Mr Busisa Moyo similarly agrees that production is one of the key factors to boost growth.
“We need a stimulus package to help us boost production, but there are no investors or money lenders who are willing to inject fresh capital because of what happened in the past and this presents a difficult situation for us,” he said.
GRI chief executive officer Mr Ngoni Dzirutwe said Zimbabwe and the rest of the continent need to adopt a new paradigm that promotes self-sufficiency as opposed to reliance on support from the West.
“Governments, businesses and civil society in Africa must begin to implement their plans aimed at growing their economies and position the continent as an investment destination,” he said.
Economists who participated during the online forum convened by GRI say while the lockdown was necessary to contain the spread of the virus, it would definitely have far-reaching implications on the economy.
A partial lockdown will therefore be critical to enable production of goods to meet local demand.
However, it is recommended that the relaxation has to be within the confines of set parameters to reduce the spread of the coronavirus.