By Carli Lourens and Brian Latham
Sept. 16 (Bloomberg) -- Zimbabwe’s Finance Minister Tendai Biti said he plans to simplify taxes to lure investment, cut debt and won’t restore use of the country’s currency until annual exports more than double.
Zimbabwe needs to cut the number of taxes, restore annual exports to between $3 and $5 billion, a level last seen in about 1996, and tackle its debt “overhang” before it restores its own currency, Biti said. Exports totaled $1.52 billion last year, according to the Reserve Bank of Zimbabwe.
“The challenge for us is to broaden our tax base and to simplify it,” Biti told a mining conference in the capital, Harare, today. “Our thinking generally is to move to a flat rate of tax.”
In February, President Robert Mugabe and former opposition leader Morgan Tsvangirai formed a coalition government after intervention by the Southern African Development Community of neighboring states to end a 10-year political crisis. The economy, once the second-biggest in southern Africa after South Africa, suffered a decade-long recession that ended this year.
In mining alone, there are 15 different tax rates and a number of exemptions have cut the “effective” tax rate in that industry to 8 percent from 15 percent, he said. The top personal income tax rate is 47.5 percent.
Zimbabwe may look to emulate a simpler tax code adopted by Georgia, Biti said
500 Billion Percent
Under Georgia’s tax code, introduced in 2005, the number of taxes was cut from 21 to six, including a flat personal income tax rate of 25 percent that will fall to 15 percent by 2013, according to the government’s Web site. The country has no capital gains, inheritance or social taxes.
The government of the African country abandoned the Zimbabwe dollar this year in favor of currencies including the U.S. dollar and the South African rand in a bid to tame the world’s highest inflation rate. Inflation reached almost 500 billion percent in September last year, according to the International Monetary Fund. It is currently running at a monthly rate of 0.4 percent. Annual figures are not available.
Biti has forecast positive growth this year and Elton Mangoma, the minister of economic planning and investment promotion, told the conference that the country will expand at “double-digit” levels from next year.
Zimbabwe plans to consider new mining laws and will aim to make the country “attractive” for investment, Mugabe said in a speech at the conference.
The country currently has less than $2 million in import reserves, Biti said in an earlier interview. Total national debt is $4.7 billion, he added.
To contact the reporters on this story: Carli Lourens in Harare at email@example.com; Brian Latham in Durban at firstname.lastname@example.org.