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NewsDay

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‘Zim tax system favours companies’

Business
ZIMBABWE’S tax system is neither fair nor equitable, as it remains skewed in favour of companies compared to individuals, an independent consultant has said.

ZIMBABWE’S tax system is neither fair nor equitable, as it remains skewed in favour of companies compared to individuals, an independent consultant has said.

BY MTHANDAZO NYONI

Speaking at the Zimbabwe Coalition on Debt and Development (Zimcodd)’s media sensitisation workshop in Bulawayo last week, an independent consultant, Believer Mhlanga, said individuals contribute more to total revenues than the companies that were being offered tax holidays and incentives.

“Zimbabwe’s tax system is neither fair nor equitable, thus, it does not proffer utter social justice. Individuals are contributing even more through social contributions such as pensions, Aids levy, rural electrification levy among other indirect taxes,” he said.

“In addition, corporate tax is charged on net income, while individual tax is charged on gross income. Individuals and workers are double taxed; when they earn income and when they spend, whereas companies are taxed only on consumption.”

In the first half of 2016, the Zimbabwe Revenue Authority (Zimra) collected $356 million in individual tax, $145 million company tax and $33 million in mining royalties.

Mhlanga said this was because companies were being offered tax holidays and incentives for purposes of attracting foreign direct investment, yet citizens were not.

He said policy inconsistencies and incoherence undermined revenue, as companies that were receiving incentives meant to boost their recovery, promote export and increase output were dis-incentivised from investing.

“Coupled with tax evasion and avoidance, the fiscal measures are undermining company tax revenue and shifting the tax burden to individuals and few companies,” Mhlanga said.

“The tax threshold that falls below the PDL implies that people’s disposable incomes are stifled through taxation to the extent that undermines their access to basic livelihood; hence the current tax system is socially undesirable and unsustainable.”

He said the tax system remained less redistributive and inefficient as value added tax (VAT) contributed the majority of revenue.

As VAT contributes more revenue than individual tax, Mhlanga said the equity objective of a tax system falls short of being achieved.

“Improvements in VAT also imply that poor households that consume the larger proportion of their incomes are the rich. During the second quarter of 2016, the tax system remained socially injustice as individuals are contributing more to tax revenue than companies,” he said.

Mhlanga said dwindling domestic revenue collections were a cause for concern for Zimbabweans.

He said there was need for the government to revive the economy and to separate political interests from economic interests.

“Strategies should be in place to revive Zimbabwe’s economy, tax revenue collections are directly proportional to the performance of the economy,” Mhlanga said.