RYAN CHIGOCHE
The punitive tax burden is threatening to derail the recovery of ailing local businesses and promotes tax evasion, the Zimbabwe National Chamber of Commerce (ZNCC) has warned.
In the chamber’s latest survey report, the ZNCC chief executive officer Chris Mugaga said the Zimbabwe tax system is characterised by too many tax heads with high tax rates which do not promote compliance.
“The system is penalising the complying formal businesses the most. The system is punitive given the prevailing operating environment as it increases the cost of doing business rendering local products uncompetitive,” Mugaga said.
“The government should come up with a simplified tax regime that encourages formalisation of business given the high level of informalisation in the economy.”
Tax paying processes are considered cumbersome, bureaucratic, costly and time consuming thus making the investment climate in the country not attractive.
Zimbabwe is ranking 146 out of 190 countries with a score of 58.7.
Mauritius is the best performer in Africa. It is ranked number five in the world with a score of 94.
Zimbabwe’s tax system treats small and large businesses alike hence, stifles growth particularly of smaller companies.
The tax regime is regarded as too heavy for SMEs.
Analysts said the system impedes the growth of SMEs and also discourages the formalisation of other SMEs.
The transition of SMEs to big business or corporates is pivotal in any economy in the world.
It is believed SMEs are a measure of how well an economy is performing as SMEs are the seedbed of business growth, innovation and pillars of employment creation.
Over the past years, SMEs have become the engine for economic growth and are primed to play a crucial role towards attaining the 5.5% economic growth projected for this year.
More than 80% of the Zimbabwean workforce is employed in the informal sector as it has become key to economic growth.
