[30th September 2014]
Both Houses of Parliament Have Adjourned until 28th October
The following documents referred in this bulletin are available from the addresses given at the end of this bulletin:
• Fiscal Policy Review Statement presented on 11th September
• Monetary Policy Statement issued by the Governor of the Reserve Bank of Zimbabwe on 25th August
• Finance (No. 2) Bill, H.B.10, 2014, as passed by Parliament
• Appropriation (Supplementary) Bill, as passed by Parliament
• Supplementary Estimates of Expenditure for 2014.
Approval of Mid-Term Fiscal Policy Review Statement
The Minister of Finance and Economic Development presented his statement on 11th September [see Bill Watch 36/2014 of 22nd September]. The National Assembly debate on the statement took up most of the afternoon of Tuesday 23rd September. Debate commenced with a speech by Hon Chapfika, chairperson of the Portfolio Committee on Finance and Economic Development and included constructive contributions from Hon Biti, former Minister of Finance in the inclusive government, and several other MPs. The Minister of Finance and Economic Development responded at length, and the House then approved his motion to bring in the Finance (No. 2) Bill [see immediately below].
Passing of Finance (No. 2) Bill
Final Bill more comprehensive than Departmental Draft The Bill presented by the Minister [23 clauses] is longer than the Departmental Draft circulated previously [13 clauses]. Nine of the 10 additional clauses [clauses 15 to 23] make provision for the Tax Amnesty [see below] announced by the Minister in the Fiscal Policy Review. The tenth additional clause validates any irregular collection of special excise duty on airtime before the gazetting of the Bill as an Act [see below].
Passage of the BillThe Bill went through all its stages in the National Assembly on 23rd September and the Senate on 24th September. It will become law once the President has assented to it and gazetted it as an Act.
Contents The Bill is designed to bring into effect those changes to the taxation laws, proposed by the Minister in the Fiscal Policy Review, that need enactment by Act of Parliament. Other changes can be made by statutory instrument, such as the already gazetted increase in excise duty on petrol and diesel. The Minister described these revenue measures as building on existing measures in support of the productive sector and seeking to enhance revenue, curb the influx on non-essential imports and strengthen tax administration. The following notes adhere to the order in which the various topics are dealt with in the Bill.
Suspension of presumptive tax on small-scale miners [clauses 2 and 7] This is effective from 1st October. Note that the liability to this tax is suspended [not “abolished” as stated the Bill’s explanatory memorandum]. But an Act of Parliament would be needed to lift this suspension.
Withholding tax on tenders [clause 3] This clause amends section 80 of the Income Tax Act, which requires Government and statutory bodies to withhold, for the benefit of ZIMRA, 10% of amounts due to any contractor who has not produced an official tax clearance certificate for the most recent year of assessment. The duty to withhold will now apply where the aggregate of amounts due to a contractor in a year is $250 or more, rather than, as hitherto, to individual payments of that amount. The Minister explained that this is to stop evasion of tax by breaking up consignments into tranches of less than $250.
Penalties for not withholding tax due on payments to visiting artistes [clause 4] This clause provides for ZIMRA to impose penalties on the contractors of non-resident performing artistes who fail to withhold and pay over the tax on the gross fees paid to these artistes.
Mobilisation of funds for low-cost housing development [clause 5] This involves restricting the income tax exemption for building societies to income from their provision of mortgage finance; and, with effect from 1st November, tax-exempt status for interest earned on low-cost housing savings instruments to be issued by financial institutions [there will be regulations spelling out the details of this scheme].
PAYE irregularities in “public entities” [clause 6] This clause is a response to the large-scale failure by employers, especially statutory bodies, State-controlled companies, local authorities and State/private sector partnerships and joint ventures, to deduct and pay over to ZIMRA the employees’ tax payable on “fringe benefits” granted to their employees – including use of vehicles and accommodation, special allowances, low interest loans, subsidised or discounted goods. It empowers ZIMRA to recover the assessed outstanding tax directly from the employees or board members who benefited from this practice, whether currently serving or not. In explaining this in the Fiscal Policy Review the Minister said that the individuals hit by this provision are “mainly the management”.
Intermediated money transfer tax [clause 8] This clause clarifies the liability of providers of mobile banking services.
VAT – fiscalised electronic registers and export tax on raw hides [clause 9] This corrects an error in the definition section of the Value Added Tax Act which defines the term "fiscalised electronic register" in two different ways.
VAT – export tax on raw hides [clause 10] This suspends the export tax on raw hides until 1st January 2015. It also modifies the definition of “unbeneficiated hide” to exempt crocodile skins and hunting trophies from the tax, crocodile skins because there is currently no local capacity for value-addition.
Special excise duty on telecommunications airtime (voice and data) [clauses 11, 12 and 13] Clauses 11 and 12 insert a new Chapter into the permanent Finance Act [to fix the rate of the new excise duty] and a new Part XIIB into the Customs and Excise Act [which defines “airtime” and provides for the charging, levying and collection of the new excise duty]. The effect is as follows: starting on 1st October there is a 5% duty on airtime to be paid by the “operator” – i.e., the service provider – of every licensed cellular telecommunication system or any other electronic communications service [“licensed” meaning licensed under the Postal and Telecommunications Act].
“Airtime” means the minutes of voice calls, SMS [short message service], MMS [multimedia service], internet band width or other service a subscriber may consume through such a system or service. The operator must, by the 10th of each month, pay ZIMRA the duty owed on airtime in respect of the service/s provided by it during the preceding month. Failure to comply renders an operator liable to criminal penalties on conviction; and excise officers may close down the business of a service provider not complying with the law.
Clause 13 is a back-dating provision anticipating that it may be impossible to have this Bill gazetted as an Act on or before the 1st October. It purports to validate the collection of special excise duty on airtime that may occur “before this Act is promulgated”, meaning duty that is collected without statutory authority [and therefore collected illegally] on or after the 1st October but before the Act is gazetted and becomes law.
Royalty on gold [clause 14] reduction from 7% to 5% of the royalty that must be paid on gold produced by primary producers. The rate for small-scale gold producers remains at 3% as fixed at the beginning of the year.
Limited Tax Amnesty [remainder of Bill, clauses 15 to 23] In explaining this amnesty the Minister said that economic challenges over the past decade have resulted in taxpayers and potential taxpayers neglecting their tax obligations, in some cases totally avoided registering with ZIMRA for tax purposes. The amnesty is to encourage people to voluntarily regularise their tax affairs.
Taxes covered The amnesty refers to all taxes or duties administered by ZIMRA, i.e., not just income tax.
Period covered The amnesty affects tax obligations for the period 1st February 2009 to 30th September 2014.
Benefits and limits of amnesty If a person successfully applies for amnesty, he or she or it will be absolved from having to pay interest and penalties to ZIMRA, and there will be no prosecutions by the National Prosecuting Authority or penalties imposed by ZIMRA for such offences as false declarations, evasion or tax, failure to submit tax returns. BUT there is no relief from the obligation to pay the tax due for the 62 months to which the amnesty applies. The amnesty does not extend to the principal amount of any tax due [clause 17(3)] And the deadline for payment of any tax due is 31st March 2015 [this deadline can be extended by ZIMRA, but only in a case where there was a delay in processing an application timeously lodged or in settling a dispute between taxpayer and ZIMRA].
Application for amnesty Amnesty must be applied for. Applications must be:
• made on a prescribed application form and be accompanied by the prescribed supporting documents [the form and supporting documents will be prescribed in regulations]
• made to ZIMRA by 31st March 2015 [there is no provision for an extension of this deadline]
• disclose the applicant’s tax obligations.
Consideration and granting of applications for amnesty ZIMRA must decide on an application within ten days from receipt. Granting amnesty will depend on the applicant having made full disclosure and provided all supporting documentation.
Withdrawal of amnesty There is provision for withdrawal and nullification of amnesty granted on the strength of a false declaration or where the applicant fails to pay the amount of tax due in full by the due date.
Supplementary statutory instruments needed Regulations will have to be gazetted to provide further detail on the following aspects of the Bill:
• limited tax amnesty – application form, procedure for submission of applications;
• low-cost housing savings instrument – the definition of this instrument will be set out in regulations to be made by the Minister of Finance and Economic Development, but the regulations will not come into force until 14 days after they have been laid before Parliament, unless Parliament has passed a resolution annulling them. In other words, Parliament has 14 days in which to annul the regulations [clause 5(b)]. [Note: this provision is a device to keep the clause consistent with section 134 of the Constitution, which prohibits the delegation of “Parliament’s primary law-making power”. As the Parliamentary Legal Committee returned a non-adverse report on the Bill, it must have been satisfied that this device is constitutional.]
Passing of Appropriation (Supplementary) Bill
This Bill went through all its stages in both Houses on Thursday 25th September. It provides for the appropriation of an amount of just under $467 million to run Government, in addition to the $3,640,311,000 appropriated by the main Appropriation Act in February. [This is slightly less than the supplementary appropriation in the middle of 2013, which was $491,601,000.]
In the National Assembly the presentation of the Bill was preceded by swift approval, without discussion, of the Supplementary Estimates by the whole House sitting in Committee of Supply. The Bill, too, went through without discussion or question. In the Senate the Minister explained some of the additional appropriations and answered a few questions from Senator Chiefs about their own allowances and their need for financial assistance in acquiring motor vehicles.
The Bill lists the nine Ministries to get extra funds and the amount for each. The purposes for which the funds are needed are set out in greater detail in the Supplementary Estimates [the “Blue Book”] approved by the National Assembly and adopted in the Bill. The $18 million for the President’s Office is for “special services”; the $8 million plus for Parliament is for the vehicle loan scheme; the sums for the Ministries of Defence, Education and Home Affairs are for employment costs [totalling $210 million]. The Ministry of Agriculture gets nearly $237 million for grain procurement and agricultural inputs support.
Parliament Adjourns until Tuesday 28th October
After passing the Appropriation (Supplementary) Bill on 25th September, both Houses adjourned for four weeks, until Tuesday 28th October.
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