THE Confederation of Zimbabwe Industries (CZI) has recommended the creation of an independent office that will ensure that budgets are realistic among a raft of measures submitted to the Finance ministry. Finance Minister Tendai Biti will present the 2010 national budget on Wednesday.

In its recommendation to Biti, CZI said the Independent Office of the Budget would analyse the budget and medium term fiscal issues and produce independent as well as impartial reports.

They say the office would ensure that fiscal indiscipline is curbed and expenditure is financed from revenue generated.

"Fiscal indiscipline has been a feature of the Zimbabwean environment for many years," CZI said.

"Unrealistic budgets have from time to time been tabled resulting in the need for confidence sapping supplementary budgets."

CZI said the office should be created to complement the Parliamentary Portfolio Committee on Finance.

"The office would provide stronger parliamentary oversight of the fiscus and give us a better chance of maintaining a credible and robust budget," CZI said adding that such an office will halt any political abuse of the fiscus.

For the past five years national budgets have been premised on unrealistic assumptions such as an increase in revenue and economic growth at a time there was little effort to stimulate production and ultimately economic growth.

Over the years, government failed to rein in expenditure necessitating supplementary budgets and money printing that fuelled hyperinflation.

Analysts say Biti's budget must set the tone for economic growth.

The International Monetary Fund estimates that the Zimbabwean economy will grow by 3% this year.

"The budget depends on tax revenue which comes from economic activity.

"Government's challenge is to increase economic activity," said John Robertson, an independent economic consultant.

Robertson said government should address issues that stopped investors from coming to Zimbabwe.

To him, the Indigenisation and Economic Empowerment Act has to be repealed so are the amendments to the Mines and Minerals Act.

For most Zimbabweans, a review of the tax free threshold could be an early Christmas present.

At US$150, some feel if the amount is pushed to at least US$300, workers will have some relief.

However, the danger is that not many earn more than US$200.

The civil service, constituting the bulk of the employees is stuttering in the region of US$150 and US$200 a month and any review of the tax free threshold would leave a big chunk outside the tax bracket.

Yet the other school of thought is of the view that if corporate tax were to be cut to 25% from over 30%, companies will have more money, which they will use to increase production, ultimately leading to higher salaries.

Biti has already indicated tax reforms are on the cards but analysts warn that such measures should not be hurriedly done.

CZI says the 2010 budget should focus on "quick wins" without an overhaul of the tax structure.

"At the same time we recommend the establishment of a commission of enquiry into taxation that drives a comprehensive overhaul of the tax system," it said.

CZI recommends a reduction in the corporate tax rate to 25% with elimination of all other special tax rates for all sectors except mining that needs a specialised regime.

Analysts say the fiscal environment will remain very constrained in 2010 and one of the few options to create fiscal space is to "focus on efficiency and value for money in all government expenditure and the elimination of non-core non-essential expenditure.

The biggest threat to economic threat is the dilapidated state of water and power infrastructure, which are all key to a revival.

Water supplies, though improving, are still far from ideal while power outages have meant that industry does not reach the 60% capacity utilisation expected at the end of the year.

To use the rand or US$ has been the question troubling businesses.

The Short Term Emergency Recovery Programme uses rand as a reference currency but the US$ is the ruling the roost. Salaries and prices are in US$.

This means that local companies that import raw materials from South Africa are on the losing streak when the rand firms against the US$.

Yet for other lucky companies, the strength of the rand against the US$ has helped Zimbabwe to be competitive with South Africa, its largest competitor.

The honeymoon could be short-lived as the tables could be turned, analysts warn.

CZI recommends that the rand must be formally adopted as the reference currency with effect from January 2010.

"This would put us on a level playing field with South Africa and sort out the perennial problem of change that has unnecessarily increased the cost of living," the industrialists' body said.