Tax deferments a necessary measure to save businesses

The covid-19 pandemic has caused several disturbances and serious disruption to the business, not mentioning its impact on people’s lives throughout the globe. There are several measures some countries including Zimbabwe have undertaken in order to reduce the impact of the covid-19 on people and businesses. What appears missing for Zimbabwe is the most immediate and critical government intervention measure to address cashflow challenges currently facing most businesses following Covid-19, which is affecting their ability to honour current tax debts to the ZIMRA. Henceforth, some businesses have since filed applications for tax deferments but with little success.

As part of the measures for covid-19, the Minister of Finance through a press statement made on the 30th of March 2020 provided for  the ZIMRA to process requests for extension of time period within which tax is payable without accruing penalties and interest. This seems to suggest that the government is not prepared to give a blanket moratorium on tax deferments but to consider the applications on a case by case basis because it also needs the money. It however appears even the granting of tax deferment applications is not happening on the ground. In the normal course of business, failure by taxpayers to pay for their tax obligations leads to interests of 25% per month or any part thereof, as revised in the Finance Act no 3 of 2019 (Chapter 23:04) and also 100% penalty on the tax liability. When a tax deferment application is denied it implies that the business cannot be guaranteed that there will be no consequence of an unapproved deferment thereby causing a lot of uncertainty. Whilst it is appreciated that the government of Zimbabwe needs cashflow to pay for its recurrent and further expenditure brought about by covid-19, our view is that where a genuine cash flow challenge is presented by a taxpayer to the ZIMRA it is in the interest of the fiscus to allow such deferment. The cost is much bigger going forward, businesses straddled with debts are likely to shut down resulting in retrenchments which have the effect of placing a huge burden on the government. We have seen daily the City Councils and the vendors playing catch and mouse game, and it’s all because there are no jobs for these people. The situation will be compounded this time around because Covid-19 is affecting the whole world. For Zimbabwe, its people in the diaspora have already started coming back into the country putting a further strain on the economy. More people will need recuse packages which will come at a cost should the government fail to take timely and necessary intervention measures. A month of lock down has already witnessed casualties with some businesses not affording to honour April 2020 salaries, others paying 50% or some other percentage of those salaries, some retrenchments have already taken place, some companies within the tourism and hospitality have already announced business closure for the next three months and every day companies weighing the options to retrench in order to survive going forward.  We all don’t know when this Covid- 19 will end and better safe companies are taking serious contraction measures.

If a total moratorium of payment of taxes cannot be achieved, we implore ZIMRA to consider all genuine covid-19 cash flow constrains and grant extension where the case permits. A blanket denial of the requests for extensions is not beneficial to both the fiscus and the taxpayer. There is life after covid-19 and it is important to help businesses to make it through this period and beyond by granting fiscal reliefs to businesses in order to save jobs. Whilst the efforts by the authorities such as the deferment of the submission of the ITF 12C for 2019 and customs rebates granted on some products are much appreciated gestures for the business, tax deferments are much more appreciated because they relate to the current situation. Meanwhile, we implore the President to also consider announcing an employment tax holiday or incentives of some sort. For example, a measure such as exempting PAYE on at least 50% of employee earnings for a period of 3 month starting April 2020, linked to job retention may go a long way in saving jobs. This has a much wider and positive effect to the nation compared to the selective rental moratorium. PAYE is a more direct cost to the business whereas rentals can be negotiated or one can seek alternatives. 

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