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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