A study conducted by the African Forum and Network on Debt and Development in eight sub Saharan African countries, including Zimbabwe, has found that the majority of high net worth individuals evade tax due to weak systems.
Major short-comings in personal income tax systems placed an unfair burden on employees, said senior policy officer Tirivangani Mutazu in Harare last week. “Such loopholes provide opportunities for higher earning, self-employed people to evade tax. Low income tax thresholds do not protect the poor, according to the study,” he said.
The study emphasised the need to enforce the registration of all small and medium businesses and follow them up on payment of tax.
Exempt past debts
“SMEs should be offered amnesty for past tax debts. Government should invite them to come forward and pay taxes, and introduce lower tax rates for the informal sector. The nation should be educated to develop a culture of paying taxes. Incidences of bribery of ZIMRA officials and under declaring of goods to reduce customs duty and the challenge faced to effectively tax the informal sector all point to this need,” read the report.
ZIMRA to blame
Studies have shown that $50 billion annually is lost through tax evasion in Africa. Zimbabwe is ranked 13 on the list of African countries losing a lot of tax revenue and the AFRODAD estimates that the country lost close to $12 billion over the past three decades in uncollected tax.
An earlier study commissioned by AFRODAD entitled: “What has Tax got to do with Development: A Critical Look at Zimbabwe, Mozambique and Lesotho’s Taxation Systems,” established that revenue collection in Zimbabwe is poor due to the weaknesses in policies that regulate tax compliance.
Poor revenue collection was attributed to failure by the Zimbabwe Revenue Authority to effectively monitor business transactions. The study noted that Zimbabwe had failed to attract investment over the past decade and official development assistance had been little resulting in over-reliance on taxes for revenue generation.
“The country is not benefiting from its membership in regional trade agreements because of the slow recovery of industry. Trade deficits on the regional front makes it difficult to effectively engage in trade with other African countries,” says the report.
The study established that government was aware of its short-comings especially in the mining sector and had proposed reforms in the legislation to increase revenue collection. But many of the reforms, such as the draft Income Tax Act, still have to go through Parliament. And it is not clear how the lack of expertise in the Ministry of Finance and ZIMRA will be addressed.
“It was acknowledged that the informal sector should be brought into the tax net but not much progress has been made on this,” reported the study.Post published in: News