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ZIMBABWEAN businesses are significantly weighed down by high taxes, with the country’s tax burden of Gross Domestic Product at 23,6 percent considered too steep.

The figure does not compare favourably with those of a number of regional peers.

According to the Economic Freedom Database’s tax burden of GDP indicator, Zimbabwe tax burden of 23,6 percent of GDP, is much higher relative to the region.

The indicator shows that the Zimbabwe’s tax burden of GDP is the third largest among its regional counterparts.

Botswana has the highest tax burden of 30,2 percent of GDP, followed by South Africa with a tax burden of 25,4 percent of GDP.

Kenya’s stands at 19,4 percent; Mauritius is at 18, 6 percent and Zambia’s tax burden of GDP stands at 17,3 percent.

Rwanda                                                                                                               has the lowest tax burden of 13,3 percent of GDP.
The National Economic Consultative Forum (NECF), in its Zimbabwe National Competitiveness Report (2016) said the high level of taxes is a

significant burden to local businesses.
“In terms of local businesses, the               Zimbabwean tax regime is more costly and disadvantaging compared to [other countries],” it said.

A World Bank Doing Business (2015) report showed that Zimbabwe — in comparison to Sadc peers Zambia, South Africa, Botswana and Mozambique — was third in terms of taxation of business profits but highest in terms of labour tax and contributions and other taxes and overall ranks second in terms of total tax rate as a percentage of profit.

An analysis of Zimbabwe’s tax environment has shown that the multiplicity of fees, licences, regulatory charges, permits, and other levies, such as Environmental Management Agency fees, Medicine Control Authority of Zimbabwe licence, National Social Security Authority, Radiation Protection Authority Zimbabwe, and Health Professions Authority, among others, have huge impacts on the profitability of enterprises.

The NECF has called for a reform by way of streamlining current regulations in order to reduce the tax burden.

“These fees provide evidence for the need to reform the existing regulations and the need to introduce principles of regulatory quality across Government agencies such that any new regulation for example which has to be introduced by a particular ministry needs to be approved,” it said in the report.

Government has, however, been proactive in trying to lighten the weight of taxes on business to attract new investment.

Last month Finance and Economic Development Minister Patrick Chinamasa announced some tax relief measures in the 2017 National Budget, with particular respect to tax incentives for Special Economic Zones, among others.

Government last year also fully adopted the Rapid Results Approach, as a mechanism to quickly improve business operations and the investment climate in the country by addressing a number of critical areas, and has achieved a number of milestones.

The approach is yet to be implemented on the taxation system.

— BH24