October 9, 2019

To maintain or to repeal 2% tax, that is the question….

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Takudzwa Chihambakwe

CALLS for the Zimbabwean Government to remove a two percent transactional tax seem to be getting louder with each passing day.

On Monday the country’s biggest industrial body the Confederation of Zimbabwe Industries argued before a Parliamentary Committee on Budget and Finance that the tax was weighing heavily on business.

 “Whilst we appreciate the reasons given for having it (the tax) and the impact it has made towards covering the gap, our understanding when we supported the tax to be across the board is that it was aimed at including the previously non taxed players in our economy,” said CZI president Henry Ruzvidzo.

 “We believe it has run its course because it is now resulting in double taxation to businesses that are already heavily taxed.”

Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer, Christopher Mugaga concurred.

“Two percent was always too high for business. Removing it was the best option but reducing it to one percent is also another palatable choice.

“The tax is high for a low per capita income economy like Zimbabwe. When you celebrate primary surplus driven by this, when businesses are struggling because of it, the cost benefit analysis might not make sense,” remarked Mugaga.

However, Zimbabwe Revenue Authority Commissioner General, Faith Mazani defended the tax saying it allows the tax collector to make up for revenue shortfalls and encourages informal sector to pay tax.

“As you know we have a very huge tax debt particularly with the big companies. So with that kind of a situation the government then finds itself with a big fiscal deficit. So such taxes like the two percent transactional tax are meant to cover that gap created by those who are not paying.

“The positive that we find on the two percent is that it is charged across – meaning everyone is paying just like the consumption tax. In essence, it is an issue of our tax structure rather than the debate of weather it is a good or bad tax,” she said.

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