Zimra scar­ing away SMES: Parly com­mit­tee

Chronicle (Zimbabwe) - - Front Page - Nqo­bile Tshili

THE Zimbabwe Rev­enue Au­thor­ity has been slammed for be­ing too heavy handed, thereby caus­ing busi­nesses to hide earn­ings to evade tax.

The Na­tional Assem­bly heard re­cently that ex­or­bi­tant taxes and the gar­nishee sys­tem em­ployed by the tax col­lec­tor made the in­for­mal sec­tor, in which about $7,6 bil­lion is cir­cu­lat­ing, avoid reg­is­ter­ing busi­nesses or use banks. In­for­mal traders and small to med ium en­ter­prises re­port­edly hold the bulk of the money in cir­cu­la­tion in the coun­try. C a sh short­ages in banks that have

South Africa, in terms of out­stand­ing trade and eco­nomic is­sues with its north­ern trade part­ner, re­quested that Zimbabwe con­sid­ers phas­ing down du­ties and cer­tain taxes on cer­tain prod­ucts and submitted a pri­or­ity list of 112 prod­ucts.

“We asked them if they could present a pri­or­ity list re­sulted in peo­ple sleep­ing in queues to with­draw as lit­tle as $100 per day have been partly blamed on re­luc­tance by the sec­tor to de­posit money.

Zimra has failed to de­vice a sys­tem to tax the in­dus­try, thereby shrink­ing the tax base.

The Par­lia­men­tary Port­fo­lio Com­mit­tee on Small and Medium En­ter­prises and Co-operative De­vel­op­ment on the op­er­a­tional en­vi­ron­ment and eco­nomic con­tri­bu­tions of small and medium en­ter­prises and the in­for­mal sec­tor in Zimbabwe, told leg­is­la­tors that high bank charges and dif­fi­cul­ties in ac­cess­ing cash once it goes into a bank, were sti­fling liq­uid­ity.

The com­mit­tee’s chair­per­son, Gokwe Cen­tral MP, Cde Dorothy Mangami (Zanu-PF), said play­ers in the in­for­mal sec­tor were not re­mit­ting taxes to Zimra due to their lack of con­fi­dence in the bank­ing sec­tor.

She said SMEs have ac­cused Zimra of be­ing un­friendly to them af­ter it learnt that bil­lions were cir­cu­lat­ing in their sec­tor un­taxed.

“SME associations in­formed the com­mit­tee that since the pro­nounce­ment that $7,6 bil­lion was cir­cu­lat­ing in the in­for­mal sec­tor, Zimra had be­come ruth­less in its rev­enue col­lec­tion en­deav­ours, cre­at­ing more an­i­mos­ity be­tween the sec­tor and the agency,” Cde Mangami said.

She said Zimra’s rigid­ity has seen it fail­ing to de­vice ways of tax­ing the in­for­mal sec­tor with­out go­ing through the banks yet it was com­mon that SMEs

(in terms of) which, they want us to re­duce or re­move du­ties and cer­tain taxes. We agreed that we will come back to them in two weeks with a full re­sponse on the 112 prod­ucts,” Min­is­ter Bimha said.

The time, he said, is meant to al­low for wide­spread con­sul­ta­tions. play­ers avoid banks.

“Ma­jor tax con­tri­bu­tions by SMEs and in­for­mal traders are in the form of Value Added Tax (VAT) and Pre­sump­tive tax. The com­mit­tee was in­formed by ex­perts from Ernst and Young that tax com­pli­ance by SMEs is made dif­fi­cult by the oner­ous re­quire­ments from Zimra. For in­stance, a bank ac­count is a ne­ces­sity for an SME to be on the tax reg­is­ter, yet most SMEs do not have con­fi­dence in the bank­ing sec­tor,” said Cde Mangami.

She said Zimra was too rigid and scar­ing away SMEs op­er­a­tors by charg­ing them ex­or­bi­tant taxes.

“An il­lus­tra­tive ex­am­ple is an SME oper­a­tor from Gweru who vol­un­tar­ily ap­proached Zimra to reg­u­larise his po­si­tion but was levied penal­ties amount­ing to US$87 000. This meant that the owner would not have been able to get tax clear­ance to con­tinue with the busi­ness if the Min­istry had not in­ter­vened for a re­duc­tion. The com­mit­tee be­lieves such kind of in­ci­dents dis­cour­age SMEs from for­mal­is­ing their oper­a­tions,” Cde Mangami said.

She said sus­pended Zimra Com­mis­sioner-Gen­eral Ger­shem Pasi con­ceded that their sys­tem was flawed ow­ing to the tran­si­tion from Zim dol­lar to the US$.

Busi­nesses have of­ten com­plained of ab­stract fig­ures that Zimra comes up with as tax short­falls.

They say the fig­ures are un­jus­ti­fied and so high that if one pays, they risk clos­ing shop or bor­row­ing ad­di­tional funds to meet the Zimra bill. — @nqot­shili.

In terms of the re­quire­ment for phar­ma­ceu­ti­cal prod­ucts to be air­lifted and en­ter through OR Tambo In­ter­na­tional Air­port, Min­is­ter Bimha said he was ad­vised by his coun­ter­part that this was not a trade is­sue, but a health is­sue.

As such, he said, they agreed that the mat­ter would be dis­cussed be­tween the health min­is­ters of the two coun­tries who would make their rec­om­men­da­tions on the best way to pro­ceed.

He, how­ever, re­futed me­dia reports, af­ter his meet­ing with his trade coun­ter­part, that South Africa had given Zimbabwe a two-week ul­ti­ma­tum to re­scind its de­ci­sion on im­ports or risk se­vere re­tal­ia­tory mea­sures from its big­gest trade part­ner.

“There has never been any com­mu­ni­ca­tion prior to or dur­ing our meet­ing (with Min­is­ter Davies) that there is go­ing to be re­tal­ia­tory ac­tion from South Africa (over im­port con­trols),” he said. “I would be sur­prised if South Africa looked at re­tal­i­a­tion.”

Min­is­ter Bimha said he had ex­plained how Zimbabwe’s in­dus­trial base was dec­i­mated by the decade long eco­nomic in­sta­bil­ity; how it weath­ered the storm dur­ing that pe­riod and neg­a­tive im­pact its huge im­port bill has had on lo­cal in­dus­try.

“I gave them de­tails of how our man­u­fac­tur­ing sec­tor is per­form­ing in terms of ca­pac­ity util­i­sa­tion and the fac­tors af­fect­ing that per­for­mance. I told them that among the fac­tors, was the im­ports is­sue, which has af­fected the per­for­mance of our man­u­fac­tur­ing sec­tor and that it’s not just the im­ports from South Africa, but the rest of Africa and Asia.’’

The Con­fed­er­a­tion of Zimbabwe In­dus­tries 2015 man­u­fac­tur­ing sec­tor sur­vey re­port says in­dus­trial ca­pac­ity is at 34 per­cent.

“I also demon­strated to them the ef­fect of the re­moval of cer­tain prod­ucts from the open gen­eral im­port li­cence in 2014, which im­proved the ca­pac­ity of (some) com­pa­nies and that some com­pa­nies from South Africa have come to in­vest in Zimbabwe as a re­sult of these mea­sures,” the min­is­ter said.

Min­is­ter Bimha said he told Min­is­ter Davies that Zimbabwe’s im­port bill av­er­aged $6 bil­lion while ex­ports were $3 bil­lion an­nu­ally, a sit­u­a­tion the min­is­ter said was not sus­tain­able and was partly the rea­son the coun­try is fac­ing liq­uid­ity and cash crises.

“A se­nior of­fi­cial from the Re­serve Bank (part of the del­e­ga­tion to SA) pre­sented on the is­sue of liq­uid­ity, as well as the chal­lenge that we have ex­pe­ri­enced in terms of cash short­ages.”

Min­is­ter Bimha said im­port re­stric­tions through SI 64 were not tan­ta­mount to a ban, but were al­ter­na­tives avail­able to ev­ery coun­try in terms of the World Trade Or­gan­i­sa­tion and Sadc trade rules and pro­to­col.

“Much of the prob­lems can be at­trib­uted to the surge in im­ports. The im­ports are not crit­i­cal to Zimbabwe be­cause we now pro­duce some of the prod­ucts we are im­port­ing,” he said.

Zimbabwe will con­tinue to im­port crit­i­cal raw ma­te­ri­als, cap­i­tal goods and items that are not read­ily avail­able in the coun­try while giving its in­dus­try time and space to re­tool and ac­quire lat­est tech­nolo­gies to be able to com­pete glob­ally.

The coun­try also has im­port ex­emp­tions for re­turn­ing res­i­dents, diplomats, goods as­so­ci­ated with in­her­i­tance and for prod­ucts meant for con­sump­tion by in­di­vid­u­als or their fam­i­lies.

Zimbabwe is in the process of pre­par­ing a com­pre­hen­sive ex­pla­na­tion about the jus­ti­fi­ca­tion for in­tro­duc­ing the im­port re­stric­tions, which will be submitted to the Sadc sec­re­tariat soon.

Min­is­ter Bimha said Zimbabwe hon­ours obli­ga­tions it has signed up to to­gether with its re­gional coun­ter­parts, which ex­plains its role in cham­pi­oning the in­dus­tri­al­i­sa­tion strat­egy for Sadc.

Cde Dorothy Mangami

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