By Evans Dakwa
The issue of taxation in Zimbabwe has been topical since the announcement of the 2024 budget late last year by Finance Minister Mthuli Ncube. The uproar has been loud a d recently social media has been abuzz with the issue of presumptive tax, deemed too expensive for most Micro, Small and Medium Enterprises (MSMEs).
Namibian based Zimbabwean Economist, Mahwani Kangausaru contends that presumptive tax by its nature is punitive, meant to push traders to register for income tax. He argues government has no choice but to tax the MSMEs as the huge corporates which carried the tax burden before are no longer there to shield the rest of the Zimbabwean populace.
“Our challenge is we were never charged tax before when running businesses, back then most business was done formally by big companies hence tax coming from there was enough or rather most of the possible tax.”
“Previously Government used to buy from manufacturing companies or agents of the commodities as there was no requirement for quotations, this kept SMEs from supplying government hence the economy preferred mostly big corporations but now things have changed smaller companies are in and these guys benefiting from government tenders are trying to run away from paying tax,” he said
Instead of moaning about Presumptive Tax, Kangausaru offered an alternative for the MSMEs that could be cheaper.
” I do agree that presumptive tax is expensive for many but there is a cheaper option especially for those businesses that are super small, they can register for Income tax as by it’s nature presumptive tax is punitive, ” he said.
Income tax has an advantage in that you are only taxed on profits accrued, before you think of paying tax you will remove all the cost incurred including rentals, salaries, internet and everything else even if you are using your personal car for the business it’s part of the cost, this bodes well for new business most of which have profit margins of 20-30%, ” said Kangausaru.
He also urged Government to introduce a SME certificate that will encourage most small business to be tax compliant.
“Government must introduce and SMEs certificate. Government procurement can then compel that, any tender below 200 000 USD should be given to SMEs. Now for one to register for SME certificate, they have to go to the ministry responsible with income tax clearance certificate, proof of bank account and registration. For it to work, it has to be renewed every year and having tenders specifically reserved for small businesses will encourage them to register for tax” he argued.