Tag Archives: Zimbabwe

Set up commission to undertake debt audit

6 Aug

Flag-map-of-ZimbabwePARLIAMENT should set up a commission to conduct an audit before debt relief mechanisms can be considered as part of a roadmap to resolve the country’s
$9,9 billion external debt, a social and economic justice coalition has recommended.

Last month, Finance and Economic Development minister Patrick Chinamasa announced the setting-up of a Zimbabwe Debt Management Office (ZADMO) to maintain a comprehensive and credible computerised database of all public and publicly guaranteed external debt.

Chinamasa said the sweeping reforms would also see the Ministry of Finance as the final signatory in all loan contractions by parastatals and local authorities.

In an analysis of the reforms to curtail loan contraction, the Zimbabwe Coalition on Debt and Development (Zimcodd) said to find a lasting solution, national public debt audit would bring to the surface the “origins, structure and legitimacy, how much is owed to who, growth and impact of loans on social and economic development”.

“Zimcodd therefore calls for the Zimbabwe Parliament to immediately set up a Public Debt Commission to conduct an official audit before any debt relief mechanism can be considered,” it said.

“The commission should utilise the doctrine of odious debt, and recommend the repudiation of any previous loans which fall under this category.”

Zimcodd said the government should focus on domestic resource mobilisation and plugging “of illicit outflows through high levels of corruption, tax evasion and tax dodging in the extractive industry, particularly the mining sector”.

Zimbabwe’s huge debt has militated against the country’s capacity to attract lines of credit needed to reboot the economy.

The country has no capacity to repay the loans.

Zimcodd said it was concerned by Chinamasa’s proposals to promote the principle of vesting the power to borrow in a single authority as the move was unconstitutional since it violated section 298 (Principles of Public Accountability) and section 299 (Parliamentary Oversight of State Revenues and Expenditure) of the Constitution.

“The executive must ensure that Parliament must at every opportunity be afforded space to exercise its oversight role in all State revenues and expenditure as stated in section 299 of the Constitution,” it said.

It said the composition of the proposed External Loans and Domestic Debt Management Committee (ELDDC) was not adequate as it marginalises the public by only including the central bank governor, Treasury permanent secretary and the Attorney-General.

Zimcodd said Parliament, through portfolio committees, and civil society organisations that are working on debt and economic justice should be included in ELDDC.

SOURCE: https://www.newsday.co.zw/2014/08/06/set-commission-undertake-debt-audit/


Is the taxman snoozing?

7 Apr

afrodad_cd_COVERwhatstaxgottodoFOR a country that has every reason to invoke every law in the book to mobilise resources that are desperately needed to set the country’s economy on a sustainable growth path, it is shocking that tax evasion has become a lifestyle.

There are legions of groups, particularly in the informal sector, that still remain outside the tax bracket.

Well, some say in life nothing is certain except DEATH and TAXES, but in Zimbabwe only death is certain. Taxes? Maybe.

Last week, Small to Medium Enterprises and Co-operative Development Minister Sithembiso Nyoni said an SME survey conducted in 2012 revealed that more than US$7,4 billion is circulating in the informal sector.

Instructively, Bankers’ Association of Zimbabwe announced a fortnight ago that it had launched a survey to gauge how much is circulating outside the formal banking channels.

While the amount of money outside the mainstream economy is subject to conjecture, it is generally agreed that there are substantial amounts that are not being captured by the formal systems.

But the taxman, who is supposed to be the lead actor in scrounging for these precious dollar bills in every nook and cranny, especially at a time when direct investment and lines of credit have been difficult to come by, continues to shy away from addressing this sore anomaly.

In fact, a study conducted by the African Forum and Network on Debt and Development (AFRODAD) in 2011 railed against the Zimbabwe Revenue Authority (Zimra) for failing to effectively monitor business transactions.

For its part Government has made an effort to provide enabling legal tools that could assist local revenue authorities in formalising operations of the informal sector and also augment revenue collection from this key constituency.

Interventions that have been made thus far include: the introduction of fiscalisation through the gazette of Statutory Instrument 104 of 2010 and the floating of two tenders meant to install a cargo tracking system and electronic seals, including a data collection server infrastructure.

Efforts were also made to reform the local tax regime after Government published the Income Tax Bill in December 2012. The Bill was designed to repeal the Income Tax Act that was enacted in 1967.

But it is the lethargy of the taxman that is worrying and suspicious.

Introduced on June 8, 2010, fiscalisation was meant to introduce electronic fiscal devices (EFDs) — machines designed for use in businesses for efficient management controls in areas of sales analysis and stock control system — such as electronic tax registers (ETRs), electronic fiscal printers (EFPs) and electronic signature devices (ESDs).

In essence, these devices are designed to capture all sales information and automatically re-route it to the tax authorities, who, at an instance, are able to see how much they are owed by the enterprises.

The first phase of the project was supposed to cover big businesses, while the second phase was targeted to cover both small and medium-scale enterprises.

Predictably, this met fierce resistance from businesses. It now seems the project has been aborted. This compares to our regional peers Tanzania who embarked on the same project just about the same time that we also introduced ours. Ironically, with effect from May 15 this year, Tanzania will be embarking on the second phase of its fiscalisation project.

Tanzania Revenue Authority (TRA) now expects to collect $370 million (600 billion shillings) a month from the current $250 million (400 million shillings) from the expanding use of the electronic tax register.

TRA is targeting more than 200 000 taxpayers that have been evading the authorities.

It is believed that when Tanzania introduced ETR machines, tax collection improved by 9,6 percent for the fiscal 2010 to 2011, and 23 percent for 2011 to 2012.

TRA Director for Education and Taxpayer Services Richard Kayombo was recently quoted in the Tanzanian Press as saying it is now imperative for consumers to ask for fiscal receipts even for the purchase of a needle.

“We are now embarking on the massive campaign for people to demand receipts for anything they buy. Even if it is a beer, a soda or a needle worth 10 shillings, get the receipt . . .

“We ask Tanzanians not just to demand receipts, but to make sure they are ETR receipts and they depict the correct amount paid,” said Kayombo.

Businesses that now sell anything without issuing an ETR receipt will risk being fined $1 900 (three million shillings) on the spot or twice the amount of the tax evaded, whichever is greater.

But it will be folly to assume that the implementation of this system was seamless. It definitely wasn’t all about Valentine’s Day in the week leading to February 14 for the East African country as businesses were closed in various parts of the country, including the very busy Kariakoo shops in Dar es Salaam, Iringa, Songea and Tabora, among others.

The businesses claimed that they couldn’t afford to buy the devices.

In Zimbabwe, however, Government spent more than $10 million in VAT rebates for companies that had complied with the law, but, again, this seems to be money spent in vain.

It is a similar jaw-dropping tale with the mulled electronic cargo tracking system. Though considered in 2010, efforts to roll out the projects are now being rolled out this year, a good four years later.

In the same year, another East African economic powerhouse, Kenya, completed the implementation of its Electronic Cargo Tracking System (ECTS).

Currently, no cargo under customs control is allowed to transit Kenya without appropriate tracking devices installed.

Kenya Revenue Authority has made it imperative for importers, exporters and clearing agents to install electronic seals on cargo.

For the project, KRA had to rope in Hi-G-Tek and Navisat Telematics.

However, in Zimbabwe we have local companies that can ably supply these systems.
We continue to hear “heroic” tales of how cargo, purportedly destined for other countries in the region, is offloaded in some local suburb, including tales of how cigarettes are transported across borders in tankers to regional countries where there is a lucrative market.

If all these loopholes are closed, significant amounts can accrue to the taxman.

But there are some quarters that claim that a proper system will have the effect of prejudicing a host of officials – big and small – who are corruptly benefitting from the system.

Although this allegation has not been proved, it cannot be disproved either. These are some of the low hanging fruits that can be achieved in the short term only if the willpower is there.

There is more than meets the eye — a lot of briefcase entrepreneurs and “bush” mechanics are making a killing. It is, however, not about those making a killing.

Paying tax should be an inescapable obligation to anyone who is earning income.

It is a very dangerous and short-sighted undertaking to only burden those employed in the formal sector. Musicians, among a host of other artistes, are some of the people that are having it easy from Zimra. The current tax system is at best ignorant and at worst lax when it comes to collecting dues from local musicians.

Some musicians charge as much as $3 000 for a single show, while those that are prominent charge anything above $10 000 per show.

Well, being a money-spinning sector, no one would begrudge musicians for pocketing such hefty fees after paying a reasonable amount to the national purse.

It’s ironic that countries such as the United States of America, boasting of a Gross Domestic Product of US$16 trillion, constantly frisk its truant celebrities that intend to evade tax, but a country such as Zimbabwe that desperately needs resources, seems to be non-committal. The ball is squarely in our court.

SOURCE: The Sunday Mail http://www.sundaymail.co.zw/?p=1849


Call to consider domestic funding

13 Nov

Flag-map-of-ZimbabweTHE single biggest challenge to efforts aimed at setting Zimbabwe back on a sustainable path to economic recovery and growth after a decade of recession to 2008 is lack of access to affordable medium and long term funding. Zimbabwe faces a peculiar situation where it has to deal with a multiplicity of problems including power deficit, external competition, high cost of labour, utilities and raw material scarcity as it battles to bring the economy back on the rails.

Economic analysts believe that no matter how brilliant Government policies will be, without access to reasonably priced long term finance economic will not succeed. Billions of dollars are required to rehabilitate and put new infrastructure from water and sanitation to roads, airports, railway lines, power stations, electricity transmission lines to industrial machinery and equipment to enhance productivity.

Other productive sectors of the economy namely agriculture, mining and tourism equally require significant funding to escape the quagmire of the decade of recession. While the economic problems are varied and distinctly separable, the bottom line is that their size and magnitude has been fermented by lack of access to affordable medium to long term funding especially after dollarisation of the economy.

The scenario has constrained the country’s capacity to regenerate its productive capacity. One of the questions that have popped up is whether it is not possible to vigorously pursue innovative ways to enhance domestic liquidity mobilization to support productivity with as much as US$3 billion thought to be speculating informally.

This is not however to underestimate the amount of money required to revive the economy. Infrastructure alone, according to the African Development Bank needs US$14 billion, agriculture US$2 billion annually, industry US$2,5 billion for retooling and mining requiring US$5 billion to US$7 billion over a 7 year period.

It should be noted that building confidence in the country’s financial system will be key to efforts Government will undertake to mobilise domestic resources considering the critical intermediary role of banks in oiling economic activity. Apart from exports the other source of liquidity would be foreign direct investment. But due to Zimbabwe’s perceived risk profile, this has not worked despite the Southern African region having received over US$10 billion in FDI in 2012.

Whereas under normal circumstances Zimbabwe like many other members of multilateral lenders could also turn to global lenders for funding assistance the avenue is shut out as the country is not eligible due to arrears from previous loans. Further, most other bilateral lenders take a cue from the International Monetary Fund and the World Bank that obviously are controlled by Western countries with which Zimbabwe currently does enjoy very cordial relations since the fall out in 2000 when it redistribute whites occupied land to majority blacks.

It means Zimbabwe might not be getting any funding from Bretton Woods institutions and related lenders remote controlled from the West for as long as it will also not be able to freely deal with the countries minus the economic embargo.

But with such a scenario, Finance Minister Patrick Chinamasa has pleaded with the global lenders to at least consider shifting from insisting on the country clearing its arrears first before being eligible for low priced long term funding once again. But without ruling anything out, this remains a tricky issue.

SOURCE: http://www.herald.co.zw/call-to-consider-domestic-funding/