Prosper Ndlovu, Business Editor
COMPANIES should take advantage of the tax reforms presented in the 2018 National Budget Statement to regularise their operations and position their businesses for growth, experts have said.
Economic analysts have roundly described the 2018 National Budget as business friendly, pro-production and responsive to the economic environment requirements for industry operations.
In his budget statement, Finance and Economic Development Minister, Patrick Chinamasa, announced a cocktail of tax measures meant to cushion business operations and assist their stabilisation.
Tax expert, Mr Sifelani Nhliziyo, a senior manager with Ernst & Young, said Government has demonstrated commitment to support business growth in its budget proposals, which should be embraced by industry.
The budget proposes, among others, an amnesty on penalties and interests for all unpaid taxes accrued prior to 1 December 2017. The exemption is effective 1 January 2018 and companies have up to 30 June 2018 to pay principal taxes. Those in arrears should therefore pay principal taxes by 30 June 2018 with all administrative procedures being applicable.
“Industry and commerce players should take advantage of this window to clear their arrears and regularise their operations because paying penalties is very expensive and can cripple businesses,” said Mr Nhliziyo.
“If businesses don’t take advantage of this, Government might start enforcing tough measures by invoking provisions that allow arrests and legal processes. This risk is there when this amnesty period lapses.”
Economists say Zimbabwe needs to move away from reliance on imports and exporting raw materials but should instead invest more on value addition and beneficiation.
“As an economy we are struggling with production. If we increase production, we reduce imports which are gobbling the bulk of our foreign currency. Right now imports are bleeding the economy,” said Mr Nkululeko Mpofu, another economic analyst.
The budget also proposes duty rebate on capital equipment and exemption from excise duty on diesel, which experts say will assist in minimising construction costs. It also exempt power generation projects from Corporate Income Tax for the first five years of operation.
The move is set to entice investors into the sector and help the country beef up power generation to meet industry requirements in tandem with anticipated GDP growth. Among the bold tax moves in the budget is exemption of goat and sheep meat from 15 percent Value Added Tax, with effect from 1 January 2018.
Economist and researcher Dr Nyasha Kaseke said the exemption of goat and sheep meat from VAT will promote competitiveness by reducing costs associated with the meat products. He said the tax exemption will result in farmers having capital to channel towards enhancing their sheep and goat breeds to meet international standards and expectations. However, Mr Nhliziyo said tax exemption means that goat and sheep meat producers would not be able to claim or seek deduction of input costs from Zimra.
Government has also extended suspension of duty on imported powdered milk for 24 months to assist supply of raw milk.
Another duty rebate on capital goods has been proposed on capital goods imported by tourism operators for two years. The measure was initially introduced in 2016.
Minister Chinamasa also gave a reprieve to the textile industry citing limited administrative capacity to identify the various types of fabrics and competition from an influx of dumped cheap imported fabrics.
This is assisted by declaration of imported products under lower rated tariff codes. As such, Minister Chinamasa proposed the introduction of a Fabric Specification Declaration form that will aid verification of fabrics. On Presumptive Tax, the 2018 budget proposes commencement of revenue collection by designated agencies. This is, however, subject to conclusion of a contract with Zimra, providing for the level of agency fees and training of personnel.
Government has, however, noted that contract negotiations between Zimra and designated agents takes considerable time, thereby prejudicing revenue to the fiscus. As such Minister Chinamasa proposed to remove the requirement for a contract between Zimra and agencies appointed to collect presumptive taxes, with effect from 1 January 2018.
Mr Nhliziyo said Zimbabwe has a very friendly tax regime when compared to other countries in the region. He challenged the banking and private sectors to also play their part and assist Government in facilitating economic turnaround. Stakeholders still have room to make submissions for inclusion in the final budget that would be gazetted after being approved by Parliament.
Article Source: The Chronicle