ONE reason often cited why many African countries are among the poorest in the world despite being rich in commodities such as gold, platinum among others is that international corporates pay as little tax as possible through illegal as well as legal means.
Illicit financial flows are a curse on the African continent and research has shown that desperate governments are losing billions of potential revenue through tax incentives awarded to international corporates, leaving them with little to zero to show for such ill-thought deals.
Non-payment of taxes has serious socio-economic consequences as it leaves countries struggling to develop, build economies, create jobs and meet basic needs of their citizens.
Without tax revenues, governments cannot provide basic public services and often always depend on donor aid.
In Zimbabwe, government is failing to provide the most basic of needs and pleading financial incapacity while making it the new normal to always beg for outside help.
COVID-19 is a case in point as government is now extending a begging bowl for procurement of vaccines.
It is for this reason that we question the rationale behind awarding a special five-year tax break to Great Dyke Investments, a Russia-owned platinum company.
Tax breaks are normal in huge investments whose payback is bigger in the long-term but in normal democracies, such details are spelt out and are put out for public scrutiny. In the Great Dyke tax deal, the secrecy raises a big stink and there is no attempt by the authorities to explain how Zimbabwe stands to benefit from the tax holidays.
Everything about the deal has been questionable from the start, all the way to the composition of its shareholders. While it holds true that government sees this as a move to entice investment, for critics it stinks to high heaven because there is no detail on how it arrived at this decision and how Alrosa and its local partner will mitigate such a tax holiday.
We believe government acted irrationally and in total disregard of its constitutional mandate by mortgaging our mineral resources in a deal whose benefits are only known by those who signed it.
As one social commentator Effie Ncube aptly put it: “There is no clear link whatsoever between the tax benefits being given to the rich and the urgent task of eradicating poverty, hunger and unemployment. Therefore, the only reason there could be for the tax exemptions is that the beneficiary companies are owned by, or somehow connected to those in government. In other words, those in government are personally rewarding themselves at the expense of the poor majority, the very definition of corruption.”
Besides, tax breaks are a politically sensitive subject and have often proved to be an open cheque for corrupt and criminal transactions. In the absence of clear details on how the deal will help prop up the economy, citizens are justified to suggest that the deal raises a stink. This partly explains why it is being challenged in the courts of law.
It is fundamental for government to publicly release such details to the public domain to instill public confidence.