Disquiet over astronomical presumptive tax

LIVINGSTONE MARUFU AND CLOUDINE MATOLA

Business operators have expressed disquiet over the government’s astronomical presumptive taxes  for informal  players  across the economy, Business Times can report.

In an attempt to increase the size of the tax base, the government, acting through ZIMRA, the nation’s tax collector, mandated that operators of omnibuses used for passenger carriage for hire with accommodations for at least 25 and up to 36 passengers pay US$300 per month.

Operators of omnibuses with seats for at least 37 passengers and for the carriage of passengers for hire or reward must pay US$450, while operators of vehicles with a capacity of more than 10 tonnes but less than 20 tonnes must pay US$1000.

Operators of trucks carrying more than 15 but fewer than 20 tonnes are required to pay US$2500, while operators of vehicles carrying twenty tonnes or more are required to pay US$3000. Additionally, operators of driving schools for classes one and two must pay US$600, while operators of driving schools for classes four must pay US$300.

Hair salons, cottage industry,  restaurants and bottle operators  are now required to pay US$300 monthly.

The tax collector’s one-size-fits-all strategy, according to several observers, is impractical because informal traders differ in their stages of development.

The Zimbabwe National Chamber of Commerce  president Mike Kamungeremu (pictured) has advised ZIMRA  to develop a  streamlined  tax structure.

“In a bid to avoid taxation, some businesses  may even go further down [underground] and this defeats the initial purpose of broadening the tax base.

“What is critical for the government to do is to pay attention to the cost structures of the small businesses. The small businesses are saying they don’t have enough knowledge to do all the accounting. The US$300 is way beyond the reach of many  and if they force them, the informal trade will go further down.

“If the government wants to tax the informal traders, they really need to involve them and ask them  about the amounts that they can afford to pay per month to ensure  that the government’s policy does not kill their businesses and encourage them to comply,” Kamungeremu said.

Economist, Eddie Cross, said the move  by the government would not work.

“I do not know where these ideas come from. These are excessive and uncollectible. It will make no impact on the fundamentals or the informal sector,” Cross said.

According to Vince Musewe,  the charges are too exorbitant as  most businesses don’t have capacity to pay these taxes.

“The first question we must answer is whether this is affordable? Are these business entities making adequate money? Second issue is what exactly do they get in return for paying these taxes?

“It is difficult to create a fair system in an informal economy. Avoidance and evasion is likely to be rife fuelling massive corruption and loopholes. It’s going to be messy,” Musewe said.