HARARE: The Zimbabwe Revenue Authority (Zimra) says offering tax incentives to foreign companies is tantamount to surrendering the country’s taxing rights and would negatively impact on socio-economic development.
Under its five-year economic blueprint the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, the Government has identified establishment of Special Economic Zones (SEZs) as a strategy to boost economic growth and development.
SEZs, a similar concept to Export Processing Zones (EPZs), are designated geographical areas that operate under different economic rules from the rest of the economy. The Government has said it is planning to offer tax incentives to companies operating in the SEZs in certain industries such as manufacturing as a way of attracting foreign direct investment.
But, Zimra commissioner general Gershem Pasi said tax incentives mostly resulted in benefits accruing to the country of origin of the concerned companies and not the host country. He cited China as having successfully implemented the concept of SEZs, attributing this to the fact that the zones were created for Chinese investment rather than foreign companies.
“For Africa we want to say come, you do not pay any taxes, do everything you can, go away and we remain poor because when we give them tax incentives we are not only giving relief to the company but also transferring our taxing rights as a country to the country of origin of that company,” he said. “I think we need to take a step back and not be emotional about taxation and development.”
Mr Pasi added: “We should also be in a position to do a cost and benefit analysis of what we have done in the past. When you give an incentive what do you want to achieve? “Have we achieved what we want to achieve because we have a tendency of just giving tax incentives without taking stock of what we have achieved?” he asked.
He said the Government should instead put most of its focus on encouraging domestic investment, highlighting that currently there were too many laws and taxes that were stifling the growth of local companies.
“Let us allow individual people to do their businesses and support them where they need support,” he said. “We have created so many taxes, like at the ports of entry you have your EMAs, you have so many other divisions stepping over each other’s feet trying to charge this trying to charge that, we are killing and stifling our own people, so let’s allow people to trade and then they will pay taxes.”
