Zimbabwe to slash taxes and fees

The Zimbabwean government has announced plans to implement significant reductions in taxes and regulatory fees over the next six months as part of efforts to enhance the ease of doing business and attract more investors.

Under the new initiative, some taxes and fees will be cut by half, while others will be scrapped entirely. The move aims to simplify the licensing system and remove bureaucratic hurdles that have made it difficult for businesses to operate and grow.

Cabinet has established a high-level committee tasked with reviewing the current tax and regulatory framework, responding to concerns from industry leaders about high financial burdens and growth restrictions. The review process, expected to last six months, will streamline licensing and regulatory requirements, potentially reducing costs by 50% across all sectors.

Speaking after the first Cabinet meeting of the year, President Emmerson Mnangagwa directed his administration to fast-track the removal of excessive regulations and high administrative costs imposed by ministries and government agencies.

"Taxes, licences, permits, and regulations should support economic development rather than hinder progress," the President emphasized.

At present, Zimbabwe's formal business sector is burdened by a complex tax and permit system, requiring compliance with multiple agencies. This has led to increased operational costs, making it difficult for businesses to remain viable.

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, confirmed that the government is considering halving the number of taxes within the next six months.

"The idea is to identify which taxes and regulatory fees should be reduced or eliminated to make it easier for businesses to operate," he said in an interview with The Sunday Mail.

"We have established a committee within government to analyze this issue and provide recommendations on which taxes and fees should be cut or removed. Our aim is to reduce the cost of doing business in Zimbabwe and improve the overall business climate."

Prof. Ncube highlighted that while taxes are necessary for government revenue, the primary focus of the review is on regulatory and licensing fees collected by various agencies.

"It's not just about taxes but also about the numerous regulatory and licensing fees. We will streamline these costs and reduce the number of steps required to start and run a business," he explained.

"Some countries in the region require about half the number of licences that we do. A key target for us is to reduce both the number of steps and the costs associated with doing business by half."

The government is expected to announce the final decisions by July or August this year.

Zimbabwe's retail sector has been particularly affected by the country's complicated tax system. A report by the Confederation of Zimbabwe Retailers (CZR), presented to the Parliamentary Portfolio Committee on Budget, Finance, and Investment Promotion, revealed that excessive licensing requirements have significantly hindered business operations, particularly for small and medium enterprises (SMEs).

"The cost and ease of doing business remain a major concern for the retail and wholesale sector, with excessive regulatory requirements and licensing fees imposing heavy financial and administrative burdens on businesses," the report noted.

A fully compliant supermarket in Harare, for example, requires over 30 different licences and permits from various regulatory authorities, including health and safety permits, trading licences, environmental certifications, fire safety clearances, and several sector-specific approvals.

In Zimbabwe, a retail supermarket must obtain multiple licences from the City of Harare, including a bakery licence costing US$703 annually, a butchery licence at US$649, a food purveyor permit at US$649, and a bottle store permit at US$504. Additionally, businesses must pay annual fees to national regulatory bodies, such as US$350 to the Zimbabwe Council of Copyrights and quarterly payments of US$105 to the Zimbabwe National Road Administration for selling motor vehicle accessories.

By contrast, in South Africa, a retail outlet requires only eight licences to operate legally, while in Rwanda, a restaurant business needs just four permits.

The complexity of Zimbabwe's business regulatory system has led to an uneven playing field, with many formal businesses struggling to remain competitive against informal traders who often bypass licensing and tax obligations. Smuggling has further exacerbated the situation, with basic household goods entering the country illegally from South Africa, Mozambique, Botswana, and Zambia, avoiding import duties and taxes.

Denford Mutashu, President of the CZR, pointed out that apart from excessive licensing fees, high rentals, wages, and utility costs have also made doing business increasingly difficult.

"Retailers must cover annual licensing fees exceeding US$15,000, alongside rent, salaries, insurance, utilities, and other operational expenses. This makes the cost of doing business overwhelming, particularly for SMEs," he said.

President Mnangagwa reaffirmed the government's commitment to making Zimbabwe a more attractive business destination.

"To enhance economic growth, we must continue focusing on ease of doing business reforms. This means eliminating unnecessary barriers to investment and streamlining business registration and licensing processes," he said.

With the government set to announce detailed reforms by mid-year, businesses across all sectors remain hopeful that these changes will create a more investor-friendly environment and stimulate economic growth.