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THE Zimbabwean economy will benefit nothing by transferring its tax jurisdiction to other countries through the proposed establishment of Special Economic Zones, Zimbabwe Revenue Authority (Zimra) commissioner-general Gershem Pasi has said.

The government has since proposed to set up several SEZs across the country, with initial indications pointing to the promulgation of a Special Economic Zones (SEZ) Act by the second half of this year.

However, Pasi told the Parliamentary Portfolio Committee on SMEs and Co-operative Development yesterday that the government needed to focus on creating an enabling business operating environment, rather than setting up SEZs.

“I know people say they have looked at China what they have achieved with their EPZs, but their EPZs are promoting their own companies to be multinationals, which can then export, they’re not promoting other people’s companies to come and benefit.

“You see when you give a tax incentive to a foreign company all you’re doing is transferring a tax that’s rightfully yours to their taxing jurisdiction, so if it’s an American company, they come here and we give them a tax incentive, it’s not that they’ll not pay taxes, but they’ll now be required to pay the same taxes to the American government.

“So it’s not that the company will get away without paying taxes, we’re merely transferring our taxing jurisdiction to other countries, so I think there’re other things that we need to do to improve the environment without necessarily giving away your taxing rights as a nation,” said Pasi.

The Zimra boss added that the local economy will benefit more if critical infrastructure is improved and Zimbabwe retains its capacity to tax new foreign investments.

“Yes, within your taxing rights, you can then play around with your incentives as to how you want it to benefit the businesspeople, but it’s not what the business person is looking at, they’re looking at power, transportation, we need to revive our railways, they’re looking at water.

“Those rank much higher than taxation, but what would we do if you seem to want to put taxation as the panacea, and we may not get the results that we’re expecting,” he said.

SEZs are designated geographical regions which operate under special economic regulations that are different from other areas in the same country, and they tend to offer special conditions and incentives to promote international competitiveness.

But the Zimra commissioner-general is pessimistic on whether the proposed new SEZs will yield any better results from Zimbabwe’s previous.

“Sometimes we don’t learn from history . . . We have had these economic zones in the past, we called them Export Processing Zones and then we abandoned them because they didn’t yield the desired results.

“And now I see we’re almost repeating the same thing and we’re likely to get the same results. And when you study literature from the World Bank and the IMF and elsewhere on surveys that have been done worldwide on what businesspeople consider before they invest in a country, taxation ranks very low.

“It’s not a top issue to the serious investor. There are other issue which investors put as top priorities, if those are met, they know they’ll make a profit and they’ll pay the tax.” — B24.