Corporate tax reduction welcomed by business community

bitiThe Minister of Finance Tendai Biti (pictured) has reduced the corporate tax from 30 percent to 25 percent a development expected to facilitate the recovery of the local industry. The reduction is with effect from 1 January 2010.

Presenting the 2010 national budget entitled “reconstruction with equitable growth and stabilisation pro-poor, broad based and inclusive development framework” at the parliament building Biti proposed the reduction of the corporate tax saying the development will encourage more players in the business sector to comply.

“In line with the proposal to rationalise business tax incentives in the form of exemptions and deductions alluded to above, and also to flatten the tax rate and make it more equitable, I propose to review the basic corporate tax rate from 30 percent to 25 percent with effect from 1 January 2010,” he said.

Luxon Zembe, an industrialist and an economic commentator said the reduction of the corporate tax was a welcomed development, as it would lead to improvement in capacity utilisation in the industries.

“It is a positive development and a welcomed one too. It is going to facilitate the recovery of the local industry through an increase in capacity utilisation as funds saved by companies are going improve their operations,” he said.

Zembe said the move was long over due adding that the corporate tax in the country was higher than the average Southern African Development Community

(Sadc) average.

He said the move was going to encourage international investors to come to the country knowing that they were not going to lose lot of their money in the payment of taxes.

The reduction of the corporate tax will help to resuscitate small players in the business field to stay afloat.

Small business players have borne the brunt of the corporate tax charges as they said the development was not economically viable.

The business community has lobbied the Minister of Finance to consider rationalising the corporate tax regime saying high taxes were forcing most players to avoid paying them.

According to the submissions made by the businesspeople from across the country for the inputs of the 2010 national budget entitled “business proposal to the 2010 national budget” they said minister Biti should consider rationalising the corporate tax regime to be between 20 and 25 percent.

Minister Biti said corporate tax collections for the year 2009 made up to 4 percent of the revenue collected which was 685 million of the revenue collected.

“Corporate tax contributed US$ 25.6 million or 4 percent to total revenue, against a target of US$ 61.1 million. The sluggish performance of this revenue head is mainly because of low industry capacity utilisation of about 10 percent during the first quarter of the year.,” he said.

Minister Biti said 2009 revenue was dominated by consumption taxes such as the Value Added Tax contributed 39 percent of the 2009 budget adding that the 2010 national budget will seek to move the country from consumptive tendencies to productivity.

Post published in: Economy

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