‘Low income earners top contributors to fiscus’

Source: ‘Low income earners top contributors to fiscus’ | The Herald August 10, 2017

Business Reporter
Low income earners are contributing a greater chunk to the fiscus with Value Added Tax and Pay as You Earn accounting for 50 percent of total tax revenue.

According to a study done by the Zimbabwe Coalition on Debt and Development availed to The Herald Business, the current taxation system is regressive in nature hence inequitable and unfair.

“The poor and the vulnerable are contributing a greater chunk of their incomes to the National fiscus through VAT and PAYE. The result is a subsidised state where the poor sustain a few rich.

“The hard hit as a result of the regressive taxation system are the women and children especially those in the rural areas.

“A critical analysis of the contribution of PAYE and Corporate tax shows that tax on labour is based on gross earnings while tax for the corporate sector is based on net earnings,” said Zimcodd in the study.

The study said corporate tax contribution to the fiscus is around 15 percent, which is less than PAYE contribution.

The repressiveness of PAYE is seen when wages that are below the poverty datum line are taxed.

Zimcodd in the study said VAT is flat and fair in principle but has regressive effects as those who earn low salaries have a greater proportion of their incomes going to VAT compared to high income earners. The study said there is lack of transparency and accountability in the administration of tax revenues regardless of the fact that there are constitutional provisions on transparency and accountability.

“Transparency and accountability are compromised by a number of factors that include involvement of many revenue collecting agents and failure of collecting agents to remit resources into one account.

“In the mining sector there are various agents that collect revenue before it reaches Treasury. In addition, lack of transparency in specific sectors is also attributed to lack of provisions on accountability in the Mining and Minerals Act,” said the study.

According to the study, lack of development from tax collections has created a negative perception among tax payers about revenue authorities. This has seen tax payers creating a culture of non-compliance. Lack of voluntary compliance culture among tax payers was also cited is due to stiffer penalties for those who default.

The study further said that lack of development is a result of recurrent expenditures which are consuming a greater proportion of national resources.

“Going forward there is need to strengthen and clarify the links between revenue and expenditure,” said the study.