Value added tax (VAT) is a key tax for generating revenue in Zimbabwe and all African states, and for financing the budget in African countries. However, the revenue authorities are not collecting large amounts of VAT for various reasons, including ineffective administration and tax evasion.
The value added withholding tax (VAWHT) system brings the merits of tax deduction at source into VAT in order to curb tax non-compliance and tax evasion, and to generate more tax revenue. Both taxpayers and tax administrators perceive the VAWHT system as a way of considerably increasing revenue. However, it is not seen as an effective tax system, and is associated with high administrative costs, negatively impacting the cash flows of suppliers, and loss of customers and suppliers.
This brief makes recommendations for how the government can get more benefits from the VAWHT system.
