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NewsDay

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CZI pushes for tax reforms

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INDUSTRY and commerce has lobbied Finance minister Patrick Chinamasa to review the country’s tax regime in the forthcoming national budget amid concerns of massive company closures.

INDUSTRY and commerce has lobbied Finance minister Patrick Chinamasa to review the country’s tax regime in the forthcoming national budget amid concerns of massive company closures.

Bernard Mpofu,Acting Business Editor

The Confederation of Zimbabwe Industries (CZI), has submitted a raft of measures required to turn around the manufacturing sector on the back of subdued capacity utilisation. The Finance minister has since postponed the budget presentation to either next month or next year. Traditionally, the budget is presented in November.

CZI said government should, among other measures, reduce the top rate of taxable income to 35% to improve domestic savings and consumption. Experts say the country’s income tax threshold has triggered skills flight over the last decade.

Already, other business organisations which include the Zimbabwe National Chamber of Commerce and Chamber of Mines of Zimbabwe have also engaged treasury in a bid to review taxes.

The Chamber of Mines wanted government to revise mining royalties, saying the current regime discouraged investment in the capital-intensive sector. The mining sector, according to the World Bank, was expected to continue to grow below potential in 2014, at 3,4%, mainly on expanded production in platinum.

The industrial lobby group also proposed a reduced rate of corporate tax for any company with more than 50% of its revenue from own manufactured products over the next five years. This, the CZI argued, would enable local companies to retool and become competitive. Capacity utilisation for the manufacturing sector this year declined to 39% from 44% mainly due to funding constraints.

The CZI also urged government to postpone the new Tax Bill arguing that the new law has several contentious issues which may stifle the growth of local industry. “It had previously been agreed that surtax revenue will be ring-fenced and re-invested in industry. We recommend the implementation of the ring-fencing and the use of these funds to recapitalise industry,” the CZI said.

“We all understand the need to reduce the current account deficit. Government has protected local industry using tariffs and surtax and industry is grateful for Government action. However, imports still continue to rise. We also understand that blanket approaches have not shown success in other countries and that a targeted strategic approach is required.”

The industrial body also recommended that a task force be set up within government to analyse imports and identify constraints that prevented local companies from being competitive. This analysis, the CZI said, would be sector by sector starting with priority sectors.

“We recommend that government implements the 50%-and-above local procurement target. We also recommend that government publishes monthly results on exactly what proportion of procurement has been of locally manufactured goods,” CZI said.

“To encourage investment in the sector we recommend a reduced rate of corporate tax for any company with more than 50% of its revenue from own manufactured products. We recommend a rate of 15% for the next five years.”