01 March 2022

An effective Parliament is an essential part of the jigsaw puzzle in the campaign to achieve transparency and accountable management of public resources, including in helping to point the nation’s sustainable development compass in the right direction. According to Parliament of Zimbabwe’s website, its “…core functions have evolved over millennia and in their present form; they chiefly comprise legislation, consent to taxation and control of public expenditure, debate on government policy and scrutiny of government administration.” Precisely, this is what gives the pulse to the African Parliamentary Network on Illicit Financial Flows and Taxation (APNIFFT) hosted by the Tax Justice Network Africa. As a cascading move at the country level, TJNA joined hands with the Zimbabwe Environmental Law Association (ZELA) and the Stop the Bleeding Campaign to re-energise Zimbabwe’s APNIFFT chapter. The workshop was held in Kadoma on the 21^{st of} February 2022.

Strengthening the role of Parliament to curb IFFs in Zimbabwe is timely especially now when the country is grappling with massive shocks – cyclones, droughts, COVID-19, and unsustainable debt. All these challenges have elevated the need to boost government revenue. Notwithstanding other challenges like corruption, the weak revenue governance resulting from the erosion caused by IFFs has negatively impacted public service provision – limited access to essential health and education services. IFFs resulting from tax evasion and tax avoidance respectively stem from illegal and unethical practices by multinational corporations and the wealthy.

The manifestations of IFFs are unequal and some of these include secretive mining agreements that are lopsided in favour of investors, abusive transfer pricing practices by multi-national corporations that enable corporates to evade taxes in jurisdictions where their main economic activities are located, overly generous tax incentives, smuggling, and corruption. Annually, Zimbabwe loses more than US$1.2 billion due to gold smuggling. Tax incentives from one large platinum miner drained US$100 million from the national purse. This came about after the revenue authority lost a court case on the legality of the platinum royalty stabilisation agreement. Recently, Great Dyke Investments was awarded a five-year tax holiday on corporate income tax, additional profit tax, and withholding tax on dividends regardless of the COVID-19 induced pressure to generate more government revenue to invest in health sector.

All these depressing cases, are a tip of the iceberg but trigger the big question, what are government, Parliament, and civil society doing to shore up government revenue needed to increase public expenditure in universal basic service provision. From its five-year National Development Strategy (NDS) 2021-25, and national budget statements, government seems to be alive to the threat posed by tax incentives.

“Tax incentives represent forgone fiscal revenue. Notwithstanding the nexus between fiscal incentives and economic growth, the government will continuously Cost-Benefit Analysis of the existing fiscal incentives to guide the review and stream those found to be reductant’’.  (NDS 1)

For its part, Parliament revealed that the need to curb harmful tax incentives featured prominently during the 2022 national budget hearings in October 2021, thanks to public awareness-raising activities and pressure by civil society organisations (CSOs). Further, the necessity of assessing the fiscal impact of tax incentives was a major discussion point during the 2022 pre-budget seminar held in Victoria Falls, from 22-26 October 2021. Among others, “the Seminar provided a platform for MPs to interact with the Executive and present findings from the Budget Consultation conducted around the country,” According to Parliament’s website.

To nudge Parliament’s role on boosting government revenue and the curbing of IFFs, the Zimbabwe APNIFFT caucus committed to the following.

•            To pile pressure on the executive to develop a clear and coherent domestic resource mobilisation (DRM) strategy to support the country’s national development strategies. Countries like Uganda have domestic resource mobilisation strategies that are publicly accessible. Special attention must be paid to the fiscal strategy for the US$12 billion mining earnings by 2023 because minerals are highly vulnerable to IFFs. The Africa Mining Vision and the African Union’s High-Level Panel Report on Illicit Financial Flows from Africa should guide the development of Zimbabwe’s DRM strategy.

•            To strengthen Parliament scrutiny and approval of the national budget, especially the measures to curb IFFs and widen government’s revenue to boost public expenditure on health and education. The tax expenditure reports that estimate government revenue forgone should be part of the national budget proposal to gain equal parliamentary scrutiny like budgetary allocations. Also, the programme of the pre-budget seminar must be relooked at to dedicate enough time to discuss revenue-raising measures. Additionally, Parliament portfolio committees must nudge the Ministries, parastatals, and State-Owned Enterprise under the stewardship to develop a robust proposal for revenue-raisings

•            To review all existing mining agreements to ensure the government’s fiscal take from mining is not prejudiced. Notably, the Constitution of Zimbabwe under Section 315 (2) requires an Act of Parliament to guide the negotiation and performance monitoring of all government contracts, and mining contracts included, “… to ensure transparency, honesty, cost-effectiveness, and competitiveness.”

•            To review the Companies and other Business Act to include Parliament among the list of government institutions that can access the beneficial ownership register without resorting to a court order. Currently, government institutions that can access the beneficial ownership register comprise the Zimbabwe Revenue Authority, the Zimbabwe Anti-Corruption Commission, and the Criminal Investigation Department. For the beneficial ownership register to be  more accountable, public access and at least Parliament access is vital to unmask corrupt individuals who hide behind the corporate mask. Beneficial Ownership register also helps to promote accountability of empowerment measures by government, for instance via public procurement, to check is women and youth are the ultimate beneficiaries.