Zimra scaring away SMES: Parly committee
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.