Suspension of 5-yeartax holiday to earnState coffers more
THE abolishment of the five-year income tax holiday by Government will enhance its ability to collect the much needed revenues for provision of public services, says the Centre for Trade Policy and Development (CTPD).
During the presentation of the 2018 national budget with a total cost of K71.6 billion, Minister of Finance, Felix Mutati, proposed to abolish the five-year tax holiday.
In place of the tax holiday, Mr. Mutati proposed to grant accelerated depreciation for capital expenditures by qualifying investments in priority sectors.
The budget requires aggressive efforts towards broadening the country’s tax base and the phasing out of tax incentives such as the tax break is one such measure.
CTPD executive director, Isaac Mwaipopo, said the proposed scrapping of the five-year income tax breaks by the government could assist in increasing and improving equity within the tax system by further reducing the burden on formal employees.
“Numerous tax incentives have led to a poor performance of taxes collected through corporate income tax and led to over burdening of taxes from low to middle income earners who are the largest contributors to the tax base,” he said.
Mr. Mwaipopo said tax incentives should be minimised and their applicability must be restricted to where there was proven benefit outweighing costs as they could be an avenue upon which colossal loss of tax revenues could take place.