ZIMBABWE’S industries warned this week that the country’s tax collection agency would be overstretched if new measures requiring non-compliant businesses to register with authorities are carried through.
This is contained in a Confederation of Zimbabwe Industries (CZI) report, which gives the business lobby’s insights into the implications of the 2024 national budget to companies.
As part of moves to broaden the tax base, Finance, Economic Development and Investment Promotion Minister Mthuli Ncube proposed in November a wide range of new measures, including compelling non-compliant businesses to register first, before accessing merchandise from wholesalers.
He said with effect from January 1, 2024, only licensed holders who comply with tax laws will be able to purchase goods from manufacturers and wholesalers in order to improve domestic resource mobilisation and restore the trading structure, where the majority of goods are retailed through the formal sector.
In its report, CZI said in as much as the intention was admirable, it would have detrimental effects on the Zimbabwe Revenue Authority (Zimra).
CZI said Zimra was struggling to cope.
“It is just impractical to add thousands more tax payers to the Zimra systems, which are already having trouble handling the current base,” CZI said in its report, which is titled, CZI 2024 National Budget Response Paper’.
“The requirements for informal firms to be licensed, tax compliant and VAT (value added tax) registered to buy from formal business is a very high bar. Since the official system does not now provide foreign currency, the informal sector has provided a vital lifeline to formal firms, enabling them to survive. Closing this vital source of income will have severe negative effects on legitimate enterprises and decreasing government revenue. Informal firms will respond to this simply by going further underground,” read the CZI report.
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It added that only traders with a valid liquor license were allowed to purchase alcohol from manufacturers and about 15 000 traders will be adversely affected by the proposed adjustment, which will have a significant impact on their welfare and that of their dependents.
Last week, the Independent reported that thousands of jobs would be lost and many traders would be distabilised under the new requirements.
“Manufacturers of alcoholic beverages currently only sell to traders that possess a valid liquor license. Over 60% of the lager and sorghum beer is sold through bottle stores, night clubs, and general dealers that do not meet the threshold for VAT (value added tax) registration of turnover of US$25 000 per annum,” CZI said.
“The proposed change will impact of 15 000 traders and have serious implications on their welfare and their dependants. Manufacturers of soft drinks and bread sell mainly through general dealers, supermarkets and quick service restaurants. A significant proportion of the general dealers, bottle stores, tuck shops are not registered for VAT because they do not meet the threshold. The informal traders account for about 5% of soft drink sales. The requirement for VAT registration will affect over 20 000 traders, which also has serious implications on welfare,” it added.
Zimra did not respond to the Independent's questions. — Staff Writer.
