• The group said it continued to suffer from IMTT tax
  • The group further lamented the unrealism of a 34.3% corporate tax rate 
  • Zimbabwe’s good country index and global competitiveness deteriorated in 2021

Harare- Zimbabwe Stock Exchange (ZSE)-listed largest retail outlet, OK Zimbabwe says the taxation system imposed on corporations by the government is both unrealistic and unsustainable to companies as it shuns investors and productivity at the national level. 

Zimbabwe’s global economic competitiveness ranking in 2021 was very worrisome at 127 out of 140 countries with the good country index falling to 111 out of 153 from 100 in 2019. Last year, the United Kingdom and the USA further labelled Zimbabwe as a toxic destination for investments due to corruption, high taxation systems and political indiscipline.

Companies in Zimbabwe are currently charged a 4% intermediate money transfer tax (IMTT) and the Group said it further paid a corporate tax rate of 34.3%. The IMTT tax was introduced in 2020 at 2%. However, the government revealed the tax upwards to 4% on all domestic foreign currency transfers last month. 

Resultantly, the Group’s income tax expenses for the full year ended 31 March 2022 soared by 26% to ZWL 2 billion from ZWL 1.6 billion in 2021.

These, have contributed to lower revenue collection for companies and high production costs forcing investors to shun the country while companies put the tax burden on consumers, a scenario that has helped to fuel hovering inflationary pressures currently prevailing. 

To that end, the Group challenged the authorities to lay down a tax regime which is both favourable to corporations, and consumers and thus benefits the nation’s economic growth at large. 

“The Group continued to endure excessive intermediated money transfer tax (IMTT) during the year and the increase in the transaction thresholds had a dramatic impact on the competitiveness of the formal retail sector, drives inflation and undermines profitability and attractiveness of Zimbabwe as an investment destination,” the Group said in a statement accompanying its full-year results for the year ended 31 March 2022. 

“The Group continues to appeal to the authorities to reduce these transaction thresholds to create an even playing field for the retail trade which will benefit customers.”

“A corporate tax rate of 34.3% is unsustainable,” the Group added.

Apart from these, companies are also forced to surrender 20% and 40% of their foreign currency proceeds to the RBZ in exchange for the fast depreciating and unwelcomed Zimbabwe dollar resulting in forex deficits. 

This, the Group said had forced many businesses to resort to the parallel market to fetch the greenback at inflated prices, a scenario that has caused inflationary pressures in the economy. 

“Most market players had to rely on alternative sources of forex which fed into product pricing and the spike in the month-on-month inflation rates during the last quarter of the financial year which was hinged on the cost of foreign currency on alternative markets,” said the Group. 

“The scarcity of foreign currency resulted in the growth of the informal sector where suppliers readily access foreign currency cash in an unregulated market format.”

Despite the Group’s stores being adequately stocked for much of the financial year, it faced delays in the settlement of foreign currency on the RBZ auction system a situation that impacted the operations of its suppliers resulting in the erratic supply of some key lines.

However, the Group recorded solid full-year results with both sales volumes, revenue and profit after tax on a growth trajectory.

Sales volumes grew by 22.7% ahead of the prior year with revenue for the year accelerating by 34.7% to ZWL 79.9 billion from ZWL 59.3 billion in 2021.

Resultantly, a profit before tax of ZWL 4.8 billion which was 38.3% above the prior year was achieved while profit after tax soared by 48.9% to ZWL 2.8 billion from ZWL 1.9 billion in the prior year.

Capital expenditure for the year was 48% ahead of the prior year at ZWL 3.1 billion from ZWL 2.1 billion as the Group continued to refurbish stores and open new ones. 

“The Group continued with its store refurbishment programme with makeovers completed at OK Masvingo, OK Queensdale, Bon Marché Avondale, OK Mbare and OK Chinhoyi. The Group opened two new stores during the year, OK Banket and OKmart Chivhu,” the Group said. 

A dividend of 36.5 ZWL cents and 0.13 US cents per share was declared and the Group remains confident going forward.

“The Group will continue with its expansion plans, with several refurbishments and new stores scheduled for the current financial year.”

“The Group is also upgrading its ICT platforms to improve operational efficiencies and support its innovation thrust.”

Overheads grew by 37.0% over the prior year due to staff costs, electricity charges, rentals, bank charges and depreciation.

“The increase in staff costs was driven by the imposition of salary and national pension fund increases.”

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