LOCAL legal think tank, Veritas, has revealed the 2025 National Budget statement is basically an announcement of aggressive tax collections.
Last week, Finance, Economic Development and Investment Promotion minister Mthuli Ncube presented a ZiG276,4 billion 2025 National Budget, against expected revenue of ZiG270,3 billion.
To enhance revenue collections, Ncube announced several new taxes effective January 1 2025 on plastic bags, betting, rental income and fast foods.
In its analysis of the budget, Veritas said it was clear that the government had been struggling to raise revenue.
“To remedy this, the minister proposes a cocktail of interventions. However, the Finance Bill still has to pass the National Assembly, and once it is passed it will be interesting to see how far the new measures are complied with in our ailing economy.”
Veritas said Treasury had been disturbed by low and late revenue collections in an environment where inflation was high and decided to reduce the days within which companies that collect vallue-added tax (Vat) to remit to the taxman.
“To improve the situation, the minister proposes the following: mandatory tax registration for emerging sectors: Certain business categories like car dealers and hardware operators must register for taxes, failing which specific quarterly corporate tax payments are mandated,” Veritas said.
“Changes to Vat payment deadlines: Vat remittance deadlines to be reduced from 25 days to 15 days after collection; and reduced interest rate for local currency revenue remittances adjusted from 200% to the bank policy rate plus 5%.”
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Veritas said receipts from non-mortgage activities by building societies would now be taxed.
“Degree of export orientation for Special Economic Zones (SEZs) will be reduced from 100% to 80%, while tax holidays for SEZs will be replaced with a 15% corporate income tax rate,” Veritas said.
Commenting on the 2025 National Budget, local financial services firm, IH Securities, said existing formal sector would continue to face higher levels of taxation, despite moderate efforts to expand the tax base in the budget.
“This will exert sustained pressure on corporate earnings given limited room to pass on the marginal cost to the consumer. On a positive note, there were concessions made such as the abatement of sugar tax on cordial drinks which will provide some price relief to consumers.”
The firm said in the absence of rigorous measures to shrink the electricity supply gap, efforts to revive primary sectors may be undermined.
“The country’s debt burden remains at unsustainable levels and the success of the ongoing arrears clearance and restructuring process, which is expected to lead to lower debt servicing obligations, remains to be seen,” IH Securities said.
“The MoFED’s (Treasury) indication of continued efforts to boost demand for the ZiG reinforce government’s commitment to de-dollarisation in the medium to long term. We anticipate that the operating environment will remain challenging for listed companies into 2025 given increasing levels of taxation, higher regulatory costs and worsening power supply.”
The firm said in light of all this, it favoured large established businesses with significant market share, strong operating cashflows and balance sheet strength, such as Innscor Africa Limited and Delta Corporation Limited.
