Revised taxes, regulatory fees in six months

Debra Matabvu

Chief Reporter

Some taxes and fees will be reduced by half, while others will be eliminated entirely.

This overhaul is intended to simplify the licensing system and reduce bureaucratic barriers, making it easier for businesses to operate and thrive.

Cabinet has since established a high-level committee to review the existing regulations and fees, taking into account the concerns of industry leaders regarding the burdensome financial costs and hindrances to growth.

The review, set to take about six months, aims to streamline all licensing and regulatory processes, with the goal of slashing associated fees by 50 percent across all sectors.

This significant reduction is expected to ease financial pressures on businesses, foster competitiveness and stimulate economic growth.

During the first Cabinet meeting of the year recently, President Mnangagwa directed his administration to expedite the elimination of excessive regulations and punitive administrative costs imposed by ministries and Government agencies.

He said taxes, licences, permits and regulations should facilitate economic development rather than hinder progress.

Presently, the formal business operating environment is characterised by high tariffs and an intricate regulatory structure that requires businesses to comply with multiple tax and permit obligations across various agencies.

This complexity has increased operational costs, making it difficult for some businesses to remain viable.

In an interview with The Sunday Mail, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said there were plans to halve the number of taxes within the next six months.

“The idea is to see which of these taxes and which of these regulatory fees ought to be reduced or scrapped, to make it easier for businesses to do business,” he said.

“We have set up a committee within Government which is going to look into this matter and then we will make recommendations as to what should be removed and what should be reduced.

“The cost of doing business in Zimbabwe is relatively high, and we are working to improve the business environment. Part of the solution lies in addressing regulatory fees and licensing costs.

“Taxes are collected by the Zimbabwe Government, while regulatory fees tend to be collected by agencies.”

Prof Ncube said while taxes remained essential to Government revenue collection, the broader focus of the review was on reducing regulatory and licensing fees collected by agencies.

“I would not say taxes (are the problem) as such; I would actually say it is more to do with regulatory and licensing fees than the number of taxes,” he continued.

He said the Government’s plan was to ensure the number of business licences and taxes was benchmarked against regional and international standards.

“We will streamline the taxes; we will cut out some of them; we will reduce the number of steps required to set up and run a business; and reduce the number of licences,” said Prof Ncube.

“We are aware that in some countries in the region, businesses require about half the number of licences we do. A good target would be to cut the number of regulatory licences needed to start a business by half.

“If we can achieve that — halving the number of steps and halving the cost of doing business — that would be a good target and that is a target that we are aiming for.

“At this stage it would be premature to say, this one will be removed, this one will be scrapped, this one we’ll reduce, it would be too early to do that.

“Our view is that in the next six months we will make progress. So, give us about six months. I would say about July, August this year, we should be able to have definitive information as to where we should cut and reduce.”

The retail sector has been particularly affected by Zimbabwe’s complex tax system.

According to a report by the Confederation of Zimbabwe Retailers (CZR) presented to the Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion, the excessive number of licences has significantly hampered business operations, particularly for small and medium enterprises (SMEs).

“The cost and ease of doing business remains a significant concern for the retail and wholesale sector, with excessive regulatory requirements and licensing fees placing a heavy financial and administrative burden on businesses,” CZR said in the report.

“Currently, for a supermarket to be fully compliant with all operational requirements, it must obtain and maintain over 30 different licences and permits from various regulatory authorities.

“These include health and safety permits, trading licences, environmental certifications, fire safety clearances and several sector-specific approvals.

“The sheer volume of these requirements not only increases the cost of doing business, but also discourages investment and expansion, particularly for SMEs that struggle to meet compliance costs.”

According to the report, a retail supermarket in Harare must secure multiple licences from the City of Harare, including a bakery licence that costs US$703 annually, a butchery licence at US$649 and a food purveyor permit at US$649.

A food takeaway licence for the supermarket costs an additional US$649, while a bottle store permit requires US$504.

The city also mandates a financial services licence at US$564, a health report at US$575 and a shop licence at US$564.

Beyond municipal fees, businesses must comply with national regulatory requirements.

The Procurement Regulatory Authority of Zimbabwe requires supermarkets to obtain annual licences for various product categories, including groceries and provisions, stationery, butchery, corporate gifts, packaging materials and fresh produce, each costing US$120.

Additionally, businesses must pay an annual fee of US$350 to the Zimbabwe Council of Copyrights and quarterly fees of US$105 to the Zimbabwe National Road Administration for selling motor vehicle accessories.

Environmental regulations also contribute to the cost burden.

The Environmental Management Agency requires supermarkets to pay annual fees for generator emissions permits, with the green emissions permit costing US$152,25 and the blue emissions permit US$136,50.

The Ministry of Local Government and Public Works requires a bottle store licence costing US$110 and a wholesale permit at US$800.

The Zimbabwe Tourism Authority charges an additional US$305 for businesses falling under its regulatory scope.

Other compliance requirements include fire safety inspections, gas storage permits and food handlers’ certificates.

These numerous regulatory demands place a significant strain on businesses, particularly SMEs, and contribute to a challenging operating environment.

As a result, many formal retailers struggle to stay afloat due to these inordinate regulatory requirements, while informal traders, who often bypass these regulations, thrive.

This has led to unfair competition, with informal retailers offering lower prices since they do not incur the same compliance costs.

The situation is further exacerbated by rampant smuggling, with basic household goods flooding informal retail outlets.

Many of these products are smuggled from South Africa, Mozambique, Botswana and Zambia, with those involved avoiding import duties and taxes.

Consequently, formal retailers, who adhere to tax regulations, face an uneven playing field and struggle to compete with informal traders on price.

In an interview, CZR president Mr Denford Mutashu said apart from excessive licensing fees, other factors such as high rentals, salaries and utility costs further hinder the ease of doing business.

“In addition to licensing fees that exceed US$15 000 annually, retailers must also cover rental costs, which are charged exclusively in foreign currency,” he said.

“They also have to pay salaries, insurance, utilities and other overhead expenses. The cost of doing business becomes overwhelming for small businesses.”

During the first Cabinet meeting of the year, President Mnangagwa reiterated his administration’s commitment to enhancing the ease of doing business.

“To enhance the overall performance of our economy, the ease of doing business agenda continues to be an important aspect of our programming,” he said.

“In that regard, concerted efforts must be made to revisit all the areas that hinder the start or growth of all investments, whether local or foreign.”

In comparison, other countries in the region have far fewer regulatory requirements.

In South Africa, a retail outlet requires a maximum of eight licences to operate legally, while in Rwanda, a restaurant business needs only four permits.