A TAX expert has called on government to return the corporate tax rate to 25% from the current 24% that was introduced at the start of COVID-19 pandemic to bring equity in the taxing regime.
At the start of the COVID-19 pandemic, government reduced the value-added tax (VAT) rate to 14,5%, from 15%, while the corporate tax rate was lowered to 24%, from 25%, to allow for economic recovery.
However, last year Finance minister Mthuli Ncube returned the VAT rate back to 15%, a measure that went into effect beginning this year as Treasury’s coffers continue to be on a decline.
Tax and Natural Resource Governance expert Mukasiri Sibanda told NewsDay Business in a wide-ranging interview this week that in order for the VAT reversal to be fair, a similar reversal was needed with the corporate tax rate.
“Corporates in the mining sector in 2021 were told to pay 24%, but now we are not seeing the government giving them equal treatment to say we are now going back to 25% so if you can look at that 1% loss that is being experienced, it is something that is also important to take care of,” he said.
In its third quarter report for the year, the Zimbabwe Revenue Authority (Zimra) said companies were the second biggest tax head with $100,02 billion after individuals who paid nearly $120 billion.
In the 2023 national budget, Treasury announced that corporate taxes in the first nine months of 2022 contributed over $150 billion which was the third biggest tax head after personal income (over $200 billion) and VAT (over $250 billion).
Ncube announced further tax relief measures to corporates.
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“In order to restore value, I propose that unredeemed capital allowances as at January 1, 2023 be rebased to the local currency equivalent of the outstanding foreign currency invoice value at the beginning of each financial year,” the Treasury boss said.
Sibanda’s submission comes at a time when the central bank estimates micro, small and medium enterprises sector to generate revenue of US$14,2 billion with a gross domestic value of US$8,6 billion.