Letters to the Editor: Alleviate tax burden on sole traders ZIMRA

Editor — In the second quarter of 2019, His Excellency the President of Zimbabwe was quoted in the national media to have stated that plans were afoot to alleviate the burden of harsh tax laws affecting small business enterprises in our country.

Now, just a month or so later, Zimra have been circulating letters to taxpayers urging them, among other things, to ensure that they are registered, if applicable, to collect VAT on behalf of Zimra. Taken at face value, the request is reasonable, however, the opposite is true when:

a) the timing of Zimra’s request is considered in the context of the above stated quote of what His Excellency the President imparted to the nation. i.e. sending the request before adjusting the threshold to a figure aligned with inflation is plainly wrong.

b) the untold hardship caused to thousands of sole traders if the effects of inflation are not taken into account in determining that threshold.

Based on Zimra’s inserts in the national newspaper on 5th September 2019, the threshold for mandatory VAT registration remains unchanged at $60 000.00 despite the fact that inflation since that figure was legislated has eroded the value of the ZWL by 1 200% which means that Zimra has effectively reduced the registration threshold to one twelfth of what is was before inflation took root and that fraction is getting lower every week. This insensitivity on the part of Zimra, and indeed Parliament also, flies in the face of what the President promised the SMEs. It would be so easy to align the threshold with inflation and solve this anomaly.

The figures below show that the threshold for mandatory registration for VAT is universally set at a figure that exempts small businesses that earn less than an amount whereby collecting VAT for Zimra would, not only be extremely onerous, but would place them in a position whereby they are being treated unfairly when compared to an individual employee of a company who earns approximately the same yet has no obligation to take on this onerous burden, which truly amounts to a major headache unless one is in a position to employ additional staff to implement it. The figures below show the VAT threshold in four countries, including Zimbabwe, compared to the average income of an employee at middle management level.

Country Vat Threshold Annual Income % Ratio Vat 

Thres/Income

UK £85 000.00 £53 000.00 160%

Australia Au$75 000.00 Au$75 000.00 100%

South Africa R1 000 000.00 R500 000.00 200%

Zimbabwe ZWL60 000.00 ZWL500 000.00 12% 

Zimbabwe, as can be seen in the above table, is clearly far out of line with universal tax practise which, in itself may be excusable if it did not target a particular group of sole traders and impose upon them additional onerous tax responsibilities that are not imposed upon employees of companies who in most cases earn more than the sole trader. That is clearly an injustice which should not prevail in a civilised society.

It should be taken into account that Zimbabwe has one of the highest unemployment rates in the world and that most sole traders are not there by choice but rather because they simply cannot find jobs. In addition, a great many are deprived pensioners who, through no fault of their own, have lost most, if not all, of their pensions, due to bad fiscal policies on the part of government. 

Furthermore, legislators have done nothing whatsoever to correct this glaring injustice. Some are forced, for the sake of mere survival, to practise as sole traders and of all people should be encouraged and cushioned against been unfairly and unjustly targeted to take on additional onerous responsibilities by Zimra.

It is in the interest of justice and fairness that the authorities concerned and especially Members of Parliament do something urgently to implement what the President  promised and take this burden off the shoulders of already overburdened and unfairly targeted sole traders.

   “Struggling Pensioner”

   Bulawayo

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