Sunday, 28 November 2021

REBATE OF DUTY BEING ABUSED : MTHULI

GOVERNMENT has tightened the conditions for businesses benefiting from the rebate of duty facilities amid concerns over lack of transparency and accountability, which has seen some beneficiaries making false declarations and flouting tax regulations among other unethical practices.

Since 2009 to date, the Government, through the national budget, has availed tax rebates and Value Added Tax (VAT) deferment to manufacturing, mining, tourism, agriculture, transport, energy and health sectors.

A “rebate of duty” is simply a refund of part of the customs duty that was originally paid.

While the primary function of tax laws is to mobilise resources, Treasury has exempt some key industries from paying some taxes as part of measures to reduce production costs in order to ramp up output.

The support interventions have come at a time when the productive sector is seeking to recover from years of stagnation and loss of capacity. Under the National Development Strategy (NDS1:2021-2025), re-industrialisation and realising strong export-led growth is one of the top priorities.

However, provision of such concessions reduces the amount of tax revenue that would otherwise have been collected by the Government for financing different development programmes.

For instance, between 2016 to August 2021 the value of goods imported under the rebate of duty by the productive sector was Z$225,8 million and revenue foregone during the period amounted to Z$59,6 million, according to a Treasury report. Among the beneficiaries are players in the mining, manufacturing, tourism, transport and energy sectors.

Presenting his 2022 National Budget statement on Thursday, Finance and Economic Development Minister, Professor Mthuli Ncube, revealed that instead of reciprocating Government efforts to transform the industry, the rebate on duty scheme was being abused by some businesses.

Unlike other spending programmes, the minister said the tax revenue forgone through such concessions is not subject to appropriation.

“Whereas availing of tax rebates and VAT deferment has gone a long way to enhance productivity, issues of concern observed during beneficiary company tours include the following, among others; false declaration of minerals produced, export of unpolished granite, non-submission of monthly returns to the ministry responsible for Mines and Mining Development,” he said.

Others include; “environmental degradation, lack of social corporate responsibility such as community schools, hospitals, water and housing suitable for human habitation especially in the mining sector, non-provision of safety wear for employees, false declaration of physical address and transfer of capital equipment to a new site without Zimra approval”.

Going forward, and in order to enhance transparency and accountability in the administration of rebate facilities and address the deficiencies that have been identified, the Treasury boss has proposed to tighten screws on the scheme and applicants will now be required to provide among other documents, a Zimra certified tax payment for the period prior to the application.

“Exporting companies will now be required to produce CD1 Form discharged for the period prior to application, documents proving corporate social responsibility executed and activities to protect the environment against degradation,” said Prof Ncube.

He said in the case of mines, they have to submit monthly returns to the Ministry of Mines and Mining Development.

“Treasury will publish an evaluation report on assessments undertaken to establish the transparency and accountability in the utilisation of Rebate of Duty facilities,” said Minister Ncube.

He said as part of the process to evaluate the impact of tax concessions availed to date, Treasury in collaboration with the Zimbabwe Economic Policy and Research Unit (Zeparu) and support from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), under the framework of “Good Financial Governance Programme”, will soon commission a study to “Evaluate the Impact of Tax Incentives on Socio-Economic Outcomes in Zimbabwe”. The study will focus on the manufacturing sector.

Contacted for comment, economist and local businessman Mr Dumisani Sibanda said while tax concessions were critical in assisting businesses, it was unfortunate that beneficiaries were abusing the facility.

“When you give tax concessions, it means you’re trying to grow that sector and encourage production,” he said, adding that the proposed study would help unravel a lot of critical insights about the scheme, which would assist the Government in policy formulation. Herald

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