Top economist flags tough tax, graft as major causes of Zim’s economic mess

By Caleb Chikwawawa

Renowned economist Prosper Chitambara has cited punitive taxation, corruption, and massive informalisation among the major causes of Zimbabwe’s economic free-fall, while reserving praise for President Donald Trump’s US oriented economic policies.

He was speaking in Harare on Wednesday at a Business Environment Dialogue organised under the auspices of the Tripartite Negotiating Forum.

Organisers of the symposium had asked the Birmingham trained economist to present on “The Ease of Doing Business in Zimbabwe: A comparative analysis of SADC countries Opportunities, Challenges and Recommendations”.

Chitambara also said high fuel costs in Zimbabwe made the cost of doing business locally much more tough compared to countries in the region.

“In Zimbabwe, we are facing a lot of structural challenges related to issues to do with power outages for example, issues to do with high fuel costs…” he said.

“With fuel cost, the major challenge has been the huge tax burden within the fuel sector. The government taxes so many levies and charges on fuel.

The economist said Zimbabwe has one of the world’s highest levels of informalisation.

He added, “Corruption imposes a huge premium on doing business, about 20 percent premium; so that’s an indirect tax.”

Chitambara further mentioned high transport and logistics costs on account of the country’s malfunctioning railway system as crippling factors on the ease of doing business.

He said it would be be easier to jumpstart growth and restore Zimbabwe on its economic growth trajectory if the country dealt with issues to do with the electricity sector, the energy sector and railway transportation.

He further cited inadequate infrastructure, currency shortages and attendant rate distortions as some of the factors contributing to Zimbabwe’s economic mess.

“If we look at our bank policy rate, I think we are actually the highest in the SADC region and of course, that also includes the cost of accessing finance by the rest of economic actors.

“In Zimbabwe, the issue of the huge tax burdens is one of the major challenges. One of common knowledges in economics is that countries prosper in an environment where it’s cheaper and simpler to pay taxes,” he said.

“I like what our brother in the US has been doing, brother Donald Trump, in terms of reducing the tax burden on business and even on households. That’s very critical.

Chitambara aid Zimbabwe could consider following the route of Ireland which in the early 2000s, reduced basic income tax burdens arguing this will yield rewards in a short space of time.

He said mining was one of the most highly taxed industries compared to other jurisdictions.

“The chamber of mines actually did a study last year just to see the burden within the mining sector in comparison with other jurisdictions in other countries.

“For Zimbabwe, they actually came up with a figure 69%, that’s the effective tax in the mining sector in Zimbabwe according to the chamber of mines. 69%, that’s huge.

“I think that’s a major challenge in terms of ensuring that our mining sector remains competitive. Of course they are actually decrying or lamenting the numerous taxes, fees and levies within the mining sector.

“That’s just a case study on the mining sector but obviously that’s also the same story with the agriculture sector and business have also been lamenting about the huge tax burden which is eroding their competitiveness.

“We are also feeling the impact for example through high fuel costs,” said Chitambara.