Industry presses government for tax relief

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BUSINESS wants the upcoming 2023 national budget to provide tax relief and support to both commerce and industry, which are still wrestling with the effects of the Covid-19 pandemic and imported inflation.
The president of the Zimbabwe National Chamber of Commerce (ZNCC), Mike Kamungeremu, said this week that his business lobby group had already made its “concrete submissions” to Finance minister Mthuli Ncube in this regard.

“We hope that our submissions will be taken on board and that the minister will review the intermediated money transfer tax (IMTT) on nostro transactions downwards, because the current four percent is too high.

“In addition, we hope that the IMTT will become tax deductible, because currently it is not. We also expect tax brackets to be reviewed so that our employees are cushioned.

“They (employees) are key for the success of business and currently they are heavily taxed,” Kamungeremu told The Financial Gazette — Zimbabwe’s number one publication for commerce and industry.

This comes after Ncube recently announced a US$22,5 million industry retooling and equipment replacement package, as well as a US$7,5 million tourism facilities development and upgrading fund.
“We commend the government for continuing to support industry and we hope another allocation will be provided in the 2023 budget to support value chains.
“Some companies are still yet to fully recover from the effects of Covid-19 and that package is very much needed.
“We also hope that the incentives currently in place for the tourism sector will continue for at least another 12 months to allow that sector to fully recover,” Kamungeremu added.
The 2023 budget comes at a time when the country is battling to deal with incessant power cuts which have badly affected production.
“We urge the government, through the 2023 national budget, to enhance the efficiency of energy supply and continue to apply zero duty for energy products.
“We also expect that all government taxes will now be paid in local currency as a way of increasing demand for our Zimbabwe dollar and showing confidence in our own currency,” Kamungeremu also said.

In his 2022 national budget, Ncube initially projected to disburse $968,3 billion, before revising the figure to $1,7 trillion in the mid-term supplementary budget, in light of the high inflation prevailing then.
The president of the Confederation of Zimbabwe Retailers (CZR), Denford Mutashu, said key issues for his sector included the inflationary environment, weak consumer demand, energy challenges, the poverty datum line, the IMTT, regional integration and Zimbabwe’s external trade flow.
“We have noticed some stability in prices of some basic goods and services, with commodities such as fuel and cooking oil continuing to decline. However, there are some products that still have high inflation.
“The convergence between the official and parallel market exchange rates has also substantially reduced parallel market activities and fostered stability.
“The confederation also applauds the government’s massive infrastructure development projects, which include the Harare-Beitbridge road, as well as the upgrading of the Beitbridge Border Post,” Mutashu told The Financial Gazette.
“These developments are bringing efficiency in logistics and distribution, especially considering that South Africa is our biggest trading partner.
“While inflation has receded slightly, it is still very high. Zimbabwe has also been recorded to have the highest food inflation in the world, at 353 percent, according to the World Bank.
“The inflation rate for most basic food items is also above the average inflation rate. For example, bread and cereals are at 387 percent and meat is at 377,4 percent,” Mutashu added.

“We also continue to urge authorities to utilise the 2023 national budget to foster and expedite import substitution measures to reduce the country’s vulnerability to external shocks.
“Government has already demonstrated this ability in the wheat sector where local production of the commodity has been intensified to reduce importation of the commodity.
“While we understand the government’s need to promote stability through fiscal and monetary tightening, we also urge Treasury to judiciously balance that with the need to ensure that sustainable demand is fostered to avoid social instability, including crimes such as robberies, which are on the rise,” Mutashu said further.
He also raised concerns about both electricity costs and its availability, while calling for a review of the IMTT.
“It is too high and affects both businesses and consumers at a time when incomes are still low. Over the past two years, the retail and wholesale sectors have experienced many threats and challenges which include the Covid-19 pandemic.
“As we were trying to move from the Covid-19 challenges, the Russia-Ukraine conflict broke out, pushing commodity prices up on global markets,” Mutashu added.
On his part, economist Victor Bhoroma said Treasury should address outstanding debt issues and civil service remuneration.
“We have issues that are still hanging, in particular debt repayment. Our debt has gone up to over 80 percent of our Gross Domestic Product before taking into consideration the compensation of former commercial farmers displaced during the land reform.

“The debt issue affects the private sector’s ability to borrow offshore. The minister must also look into the issue of civil servants’ remuneration.
“We still have demonstrations and strikes in education and health, for example. That needs to be resolved,” Bhoroma said.
“Zimbabwe also experienced drought this year, which affected demand. All these factors affected markets and contributed to increasing operational costs.
“It is, therefore, our plea to the government to come up with policy measures that help support the retail and wholesale sector to grow,” he said.
On the other hand, economist Vince Musewe emphasised the need for more social investment by the government.
“Our social spending is never enough. Safety nets are of huge importance. He (Ncube) has to look at the health sector, social services and education.
“Those remain the key areas for a country that is experiencing serious hardship levels. The government must invest in those areas to sustain livelihoods,” he said.
Another economist, Kipson Gundani, said it would be important for the Finance minister to contain fiscal spending.
“Fiscal policy should not become a source of hot air in the economy. The budget must provide policy leadership on key growth areas.
“It is also the role of the government to make sure that people have sufficient disposable income.
“We should tax people less to allow them to spend, and as people spend more tax accrues to the government in the form of Value Added Tax,” he said.
Meanwhile, the Parliamentary Portfolio Committee on Energy says the 2023 budget should prioritise the Energy ministry.
Speaking during a pre-budget seminar in Harare on Monday, the committee’s chairperson, Elias Musakwa, said the Energy ministry should come up with measures to end the country’s relentless power crisis.
“The country has witnessed power outages that have almost brought business activity to a halt across all sectors.
“The economy is on a rebound, with the growth rate in 2021 estimated at over eight percent.
“Industrial capacity utilisation is improving, which increases pressure on the national grid. The additional capacity utilisation translates to increased power demand.
“The distribution of electricity has been heavily affected by vandalism on transformers and copper cables.
“The importation of cheap non-durable transformers … has slowed down progress in the sector,” Musakwa said.
“Given the backlog of more than 2 000 transformers on the grid, the 2023 budget must focus on capacitating local production of transformers and bringing sanity in the industry, as well as reducing the country’s import bill,” he added.
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