Zimbabwe retailers have described the country’s taxation environment as punitive and are now pushing for a relaxed regime amid fears some operators may be forced to close shop, Business Times can report.
The Confederation of Zimbabwe Retailers (CZR) said the sector was also battling high inflation, high operating costs, high cost of borrowing, poor working capital, low disposable income due to unemployment and underemployment.
“The Confederation is concerned by the punitive taxation environment for the retail sector which has the potential to result in the collapse of the sector,” CZR said in its position paper submitted for the 2021 mid-term fiscal policy review.
He added: “We urge the authorities to prioritise measures that help consumers realise more disposable incomes to increase their real consumption levels in the face of this high inflation environment.
For instance, taxable salary bands should be increased to start from at least ZWL$50,000 going upwards in order to cushion formal employees.
“As CRZ, we are also concerned by the retrospective VAT imposed on rice by Treasury and being enforced by ZIMRA, backdated to February 2017, as the move is exerting more pressure on an industry that had already been affected by a prolonged economic crisis, with a potential of also raising prices for the consumer, for such a staple basic product.”
Zimbabwe has become highly formalised as the costs of running a formal business continue to bite.
The informal sector is not contributing to fiscus as they are not paying tax.
The informal sector has become a safe haven for smuggled goods ranging from spare parts, groceries, hardware goods, electronic gadgets, among many.
The smuggled goods pose serious competition to formal players who pay tax, making their goods uncompetitive in the market.
CZR also suggested that the tax dragnet should spread to informal or unregistered businesses instead of “deepening it to the few formal players who are already overburdened with many other taxes”.
“While section 298 (1b) of the Constitution says that the burden of taxation must be shared fairly, this is not the case in Zimbabwe as retailers are actually punished for the mere reason of being formal and complying with fiscal regulations.
“Government appears to be blind to tax illegalities of informal operators while being quite swift, rigid and tough to the formal operators for minor errors of omission and commission. This is added to the fact that an uneven playing field is allowed to thrive with informal traders getting away with their acts of economic sabotage.
Against this background, we recommend that the government reduce taxes on formal retailers so that they can survive the informal traders’ onslaught.
We have seen many formal clothing shops either closing down or streamlining their operations because there is stiff competition from cheap, second-hand clothing that are being sold on the streets by vendors who don’t pay any tax. Currently, the law is ironically incentivising those who are not complying with it.
Taking no action against such practices can only succeed in catalysing its perpetuation, much to the suffering of the economy.
We call upon the government to pronounce bold measures to address that.”
The CZR said the government should enforce measures to curb the growing number of informal businesses which have become a ‘new normal’.
“It is increasingly becoming more and more costly to run a formal business as costs pile while depressed margins have not helped matters.
“Formal shops are compelled to price using the auction rate yet the enforcement is not spreading to the informal unregistered business and SME’s. It is this enforcement gap which is paralysing the formal retail and wholesale.”