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NATIONAL ASSEMBLY HANSARD 25 JUNE 2013 VOL. 39 NO. 28

A                                         t215225                                  25/6/13

PARLIAMENT OF ZIMBABWE

Tuesday, 25th June, 2013

The House of Assembly met at a Quarter-past Two O’clock p.m.

PRAYERS

(MR. SPEAKER in the Chair)

ANNOUNCEMENT BY MR. SPEAKER

DEATH OF HON. EDWARD TAKARUZA CHINDORI-CHININGA

  1. SPEAKER:  I have to inform the House of the death of Hon.  Edward Takaruza Chindori Chininga, Member of Parliament for Guruve

South Constituency on Wednesday, 19th June, 2013.  I invite all hon.  members to rise and observe a minute of silence in respect of the late hon. member.

        All hon. members stood in silence.

SECOND READING

ELECTRICITY AMENDMENT BILL (H.B. 3, 2013)

Second Order read:  Adjourned debate on the Second Reading of the Electricity Amendment Bill.

THE MINISTER OF ENERGY AND POWER

DEVELOPMENT:  Thank you Mr. Speaker.  The motion is the amendment to the Electricity Act.

1.      INTRODUCTION

1.1 The passing of the Electricity Act [Chapter 13:19] in 2002 introduced the electricity sector regulation and paved way for the participation of private players in the sector.

1.2 While Government has invested major effort towards attracting private investment into the sector, particularly in power generation, no significant investment has been achieved.  Apart from the unfavourable macro-economic conditions, failure to attract investment has been attributed to lack of a conducive regulatory environment and amenable electricity sector structure.

1.3 The Zimbabwe Energy Regulatory Authority (ZERA) is now in place following the enactment of the Energy Regulatory Authority Act [Chapter 13:23] in August 2011.

1.4 There is need to separate the electricity transmission and distribution business in order to create an electricity bulk supply market that will facilitate and support Independent Power Producer (IPP) investments.  The separation of business will also allow privatisation of the distribution function and consequent improvement in service delivery.

1.5 The objective of this amendment is to proffer a power sector restructuring solution that will enhance the investment environment and improve service delivery across the sector.

1.6 The proposed restructuring process is in line with the National Energy Policy Implementation strategy.

2.      CURRENT STRUCTURE OF POWER SECTOR

2.1 Players

Power Sector Regulation

The Zimbabwe Energy Regulatory Authority regulates the sector to ensure that a socially acceptable balance is achieved between the interests of the electricity industry companies and electricity consumers.

 ZERA is responsible for licensing of all players in the electricity/energy sector.

2.1.2 Power Generation

  • The Zimbabwe Power Company is the major player operating power stations throughout the country with a total installed capacity of 1 960MW. ZPC is currently developing projects with capacity to add 930MW of electricity at Hwange, Kariba and Gairezi.
  • Sugar and ethanol producers in co-generation, namely Triangle

(45MW), Hippo Valley (33MW) and Chisumbanje (18MW)

generate electricity for their own use and sell any excess to the grid.

  • A number of Independent Power Producers (IPPs) have been licensed; Nyamingura (1MW) and Duru (2MW) are currently operational. ZERA has licenced IPPs with total capacity exceeding 5000 MW.  However, most of the projects are still at development stage.

2.1.3 Power Transmission

  • Only ZETDC is responsible for electricity transmission in Zimbabwe.
  • ZETDC is also responsible for systems operation, i.e. operating the grid system to ensure power supply and demand is balanced for the overall safe operation of the system.
  • The company is also the sole buyer of electricity, purchasing electricity from local suppliers as well as importing some electricity from the Southern African Power Pool (SAPP). ZETDC

is also the only seller of electricity to local consumers and exporter of electricity to SAPP members.

2.1.4 Power Distribution and Retail

 ZETDC is also responsible for operating the distribution network and revenue collection.

2.2 Functions of Players in the Power Sector

The following are the functions performed by the players in the Power Sector.

2.2.1 Sector Regulation

2.2.2 Power Generation

2.2.3 System Operation - this involves dispatch of internal power generators and imported power to meet demand and controlling all electricity flow so as to maintain stability in the power system.  Power unlike water, you cannot generate it and store it.  You must generate and use, otherwise if there is an imbalance in the system, there will be faults.

2.2.4 Market Operation – This is the administration of electricity trading arrangements.  The Market Operator also facilitates trading arrangements with regional countries in the Southern African Power Pool (SAPP).

2.2.5 Transmission network service provision

2.2.6 Distribution network service provision

2.2.7 Electricity Supply – this involves providing electricity to the final   end-user, issuing bills and collecting revenue.

  • Apart from power generation, the rest of the functions are performed by ZETDC. However, in a system where there is to be competition in generation, the system operator has to be fully independent of the players in the generation segment of the market.

ZETDC and ZPC are both ZESA Holdings subsidiaries.

  • In mature electricity markets, the above functions are performed by different licensed players. The Electricity Act provides for a

mature market thus allowing the power sector structure to evolve to a fully competitive market on a progressive basis in phases.

  1. JUSTIFICATION FOR RESTRUCTURING THE POWER

SECTOR

The first is fulfilling the initial objectives of the electricity

Sector Reform

3.1 The objectives of the electricity reform were to:-

  • Remove the ZESA monopoly and increase generation capacity,
  • Increase access to available electricity,
  • Improve overall efficiency of service delivery through attracting private sector participation and
  • Establishing regulation of the sector.

3.2 The reform saw the establishment of the Regulator. However, the electricity market structure has not developed to a competitive market.

  • The market structure is a single buyer model where competition is only in power generation in which ZPC is currently a natural monopoly due to lack of new investments by other players.
  • ZETDC is the single buyer responsible for purchasing power and selling to all customers as well as exporting power. All power producers have Power Purchase Agreements with ZETDC.

3.3 There is need to move to a fully competitive market where there is competition in both power generation and supply.

Creating a conducive environment for Investment

3.4 The sector is dominated by ZESA Holdings companies (ZPC and ZETDC) who perform all the functions resulting in other players doubting fairness in services offered by ZETDC. There is need to separate the functions of players in the power sector; particularly, system and market operations to improve investor confidence.

3.5 Restructuring of the power sector will allow it to benefit from the credit-worthiness of large customers who can be counter-parties to IPP as off-takers or direct investors.

3.6 The restructuring will allow participation by the private sector in electricity supply. Participants will have open access to transmission and distribution networks.

  • ZERA, the sector regulator;
  • Zimbabwe Power Company and Independent Power

producers will do power generation;

  • The National Grid Services Company will do systems operation, market operation and systems development planning. This will also do the transmission. This company will not be privatised because it provides the main way of the electricity sector.

Improving Efficiency in Service Delivery

3.7 Separating Transmission from distribution and the supply businesses will streamline the activities of each business and enhance service delivery.

3.8 Private sector participation in electricity supply in other countries has generally resulted in improvements in service delivery and revenue collection thereby attracting investment as investors are assured of returns.

4.      PROPOSED POWER SECTOR STRUCTURE

         The proposed structure, when fully functional, is envisaged to enable the creation of a fully competitive electricity market where the industry participants take different functions as follows:

  • ZERA – Sector regulation
  • ZPC and IPPs – Power generation
  • National Grid Services Company (NGSC) – System Operation, Market Operation and System Development Planning. The company will be state owned and not eligible for privatisation.
  • Zimbabwe Electricity Distribution Company (ZETDC) and others – Electricity distribution network service and electricity supply.

5.      RESTRUCTURING PROCESS

Due to the dominance of ZESA Holdings and its subsidiaries in the

Zimbabwe Power Sector, this restructuring exercise will only affect ZESA Holdings and ZETDC. It is proposed to implement the restructuring process as follows:

Dismantiling ZESA Holdings and re-organising ZETDC

  • Currently ZESA Holdings holds shares in addition to operating subsidiary companies.
  • ZESA Holdings is dissolved, the NGSC is formed.
  • ZETDC is unbundled and its transmission functions are transferred to NGSC while the distribution functions remain in Zimbabwe Electricity distribution Company (ZETDC).

6. CONCLUSION

Mr. Speaker Sir, I now move that the House approves the proposed amendments and that the Bill be now read a second time.

Motion put and agreed to.

Bill read a second time.

COMMITTEE STAGE

ELECTRICITY AMENDMENT BILL (H. B. 3, 2013)

House in Committee.

Clauses 1 and 2 put and agreed to.

House resumed:

Bill reported without amendments.

Third Reading: With leave, forthwith.

THIRD READING

ELECTRICITY AMENDMENT BILL (H. B. 3, 2013)

         THE MINISTER OF ENERGY AND POWER

DEVELOPMENT: Mr. Speaker Sir, I move that the Bill be now read

the third time.

Motion put and agreed to.

Bill read the third time.

SECOND READING

INCOME TAX AMENDMENT BILL (H.B.5, 2012)

Second Order read: Adjourned debate on the Second Reading of the Income Tax Amendment Bill.

THE MINISTER OF FINANCE (MR BITI):  I move that the

Bill be now read a Second time.

Motion put and agreed.

Bill read a second time.

Committee: With leave, forthwith.

COMMITTEE STAGE

INCOME TAX AMENDMENT BILL (H.B.5, 2012)

House in Committee.

Clause 1 put and agreed to.

On Clause 2

THE MINISTER OF FINANCE (MR BITI):  I move the amendment in my name.

On page 12 of the Bill, in Sub-clause (1) delete the definition of

“depreciable property” lines 45 to 47).

On pages 12 and 13 of the Bill, in Sub-clause (1) delete the definitions of “double taxation agreement” (lines 7-8) “employee” (lines 10 and 11) substitute the following definitions:

“double taxation agreement” means an agreement in force of section 89 or the equivalent provision in any previous law;

“employees” means an individual to whom employment income is paid or payable at an annual rate that is more than the amount specified in Section 14(2)(a)(i) of the Finance Act [Chapter 23:04]in respect of the year of assessment concerned; “employer”

  • means any person (excluding any person not acting as a principal or any person or class of persons specified by the Commissioner, but including any person acting in a fiduciary capacity or in his or her capacity as a trustee of an insolvent or deceased estate or an administrator of a benefit fund, pension fund, provident fund, retirement annuity fund or any other fund) who pays or is liable to pay to any employee any amount by way of employment income, and any person responsible for the payment of any amount by way of employment income to any employee under any law or out of public funds (including the funds of any statutory corporation or undertaking of the State) or out of money appropriated by an Act of Parliament; and
  • includes a representative or associate of the employer;”

 

On page 13 of the Bill, in sub clause (1) delete paragraph (f) (lines

34-46) of the definition of “financial institution” and renumber the following paragraphs (g), (h), (i), and (j) as paragraphs (f), (g), (h) and (i).

On page 14 of the Bill, in sub-clause (1) delete the definition of “gross income” (lines 5 to 9).

On page 14 of the Bill, in sub-clause (1) delete from the definition of “investment property” paragraph (c) on lines 41 and 42. On page 14 of the Bill, in sub-clause (1), insert the following definition after the definition of “investment property” ending on line 42:

“LIBOR” means the London Interbank Offered Rate;”

On page 15 of the Bill, in sub-clause 1, insert the following definition after the definition of “mining location” ending on line 30:

“mining operations’ means

  1. any operations for the purpose of winning a mineral from the earth; or
  2. any operations for the purpose of winning a mineral from any substance or constituent of the earth which are carried on in conjunction with operations referred to in paragraph (a) by the person carrying on those operations; and
  3. such operation for the purpose of winning a mineral from any substance or constituent of the earth which are not carried on in conjunction with operations referred to in paragraph (a) or by a person carrying on those operations as the Commissioner may determine to be mining operations for the purposes of this Act; and ‘mine”, whether used as a noun or a verb, shall be construed accordingly;”

On page 15 of the Bill, in sub-clause (1) delete the definition of

“notice of assessment” (lines 24 to 26).

On page 15 of the Bill, in sub clause (1) delete on line 28 to 33, delete the definition of “passenger motor vehicle” substitute the following

“passenger motor vehicle” means any motor vehicle propelled by mechanical or electrical power and intended or adapted for use or capable of being used on roads mainly for the conveyance of passengers, including an estate car, station wagon, van or similar vehicle but excluding any vehicle

  • which is used wholly or almost wholly
    1. for the conveyance of passengers for gain; or ii) by a person operating a hotel for the conveyance of guests or
  • which has seating accommodation for fifteen or more passengers, excluding the driver of the vehicle; or
  • which was purchased by the taxpayer for the purpose of being leased to a particular person and has been so leased and where the taxpayer-
    1. will not be entitled to the return of the vehicle at the expiry of the period of the lease; and
    2. has given or is required to give an option to purchase or

other right in relation to the acquisition or disposal of the vehicle to the lessee or any other person’.

On page 15 of the Bill, in sub-clause (1) delete on lines 43 to

49 the definition of “person’ and substitute the following;

“person” includes a company, body of persons corporate or unincorporated (not being a partnership), local or like authority, deceased or insolvent estate and, in relation to income the subject of a trust to which no beneficiary is entitled, the trust,”

On page 17 of the Bill, in sub clause (1), insert the following definition of “presumptive tax”, on line 1.

“previous law” means the income Tax Act [Chapter 23:06], or the

Income Tax Act, 1954 (No. 16 of 1954), or a law repealed by that Act;”  On page 17 of the Bill, in sub-clause (1) delete on lines 3 to 12 the definition of “securities” and substitute the following:

“securities” means-

  1. stocks or securities, including bonds and Treasury bills, issued by any government, local authority or statutory corporation or any similar authority or body, whether situated inside or outside

Zimbabwe; and

  1. debentures or debenture bonds; and
  2. mortgages or notarial bonds; and
  3. loans or deposits; and
  4. shares issued by a building society; and
  5. stocks or shares issued by a company; and for the purposes of the First Schedule includes any other stocks or shares and rights in immovable property;

On page 17 of the Bill, in sub-clause (1) insert at the end of the definition of “special mining lease operations” on line 18 the words, “and the phrases “special mining lease”, “special mining lease agreement’ and “special mining lease area” shall be construed accordingly”.

On page 18 of the Bill, in sub-clause (1), in definition of “trust income to which no beneficiary is entitled”, delete “and” on lines 10 and 12 substitute “or” in both cases.

Amendment to Clause 2, put and agreed to.

Clause 2 as amended, put and agreed to.

Clauses 3 to 16 put and agreed to.

On Clause 17:

 

THE MINISTER OF FINANCE (MR BITI): I move the

amendment standing in my name; that.

On page 23 of the Bill, delete Clause 17 on lines 38 to 40 and substitute the following clause;

17 Taxable Income of non-resident taxpayer

The taxable income of a non-resident taxpayer for a year of assessment shall be

  1. all payment accruing to the taxpayer from which tax is required to be withheld under Part III; and
  2. all other income regarded as accruing from a source in Zimbabwe in terms of Section 88 less any deductions allowed under this Act”.

Amendment to Clause 17, put and agreed to.

Clause 17 as amended, put and agreed to.

Clause 18 – 22 put and agreed to.

           On Clause 23:

THE MINISTER OF FINANCE (MR. BITI): I move the

proposed amendment standing in my name to deal with employment income and here we are simply providing for the situation where the employee is offered shares by the employer. We are simply clarifying that the special formula in respect of which the income upon disposal of that share is calculated. In the past, it used to be a Capital Gains Tax. We have repealed the Capital Gains Tax and treat it as business income but for employees who are getting shares; this provision is dealing with that provision.

On page 26 of the Bill, in subclause (1) delete paragraph (m) on lines 35 to 48 and substitute the following:

“(m)  where the employee is offered shares in a company that is the employer or an associate of the employer, the amounts calculated in accordance with paragraph 3 (“Calculation of gain arising from disposal of shares held by employees under share option scheme”) of the Fourth

Schedule;”.

On page 27 of the Bill, in subclause (2) delete paragraph (c) the words “ten per centum” and substitute “five per centum plus LIBOR”.

On page 27 of the Bill, in subclause (2) delete paragraph (d) (lines 12-14) and renumber the following paragraphs (e), (f) and (g) as paragraphs (d), (e) and (f).

Amendment to clause 23, put and agreed to.

On clause 24:

THE MINISTER OF FINANCE (MR. BITI): That is just a minor amendment on Business Income. I move the amendment standing in my name that on page 28 of the Bill, in sub clause (2) delete from paragraph (g) the words “belonging to a taxpayer” (on line 13) and substitute “of a tax payer”.

Clause 24 as amended put and agreed to.

Clauses 25 – 30 and 32 - 35 put and agreed to.

On Clause 31:

THE MINISTER OF FINANCE (MR. BITI): Madam Chair, I

want to clarify on Clause 31. The reason why I am doing that is that when the Committee on Budget Chaired by Hon. Zhanda and the others like Hon. Cross and Hon. Chinyadza consulted, there were a lot of representations on Clause 31 and it deals with deduction allowances from the business. What the industry is afraid of is the Provision of

Section 31(1) (a) which reads, “all expenditure and losses incurred in the production of income during that year of the assessment, other than such expenditure and losses which this Act expressly disallows for the purposes of deduction.”

Now, there is an over exaggerated outcry on this provision for fear that some things that are normally not allowed as tax expenditure or as deductable expenditure in the profit and loss account are not going to be allowed by the Commission.

I wish to allay the tax experts that we seek not to create any different precedence. In other words, everything that is allowed now will be allowed on the basis of precedence. I knew that the comments I am making here are relevant in statutory interpretation.

Whatever court that interprets Section 31(1) (a) will be bound by the precedence. I want to refer Madam Chair, to two cases that, dealing in South Africa, interpreted a similar Clause.

In XYZ Holdings vs The Commissioner for the South African Revenue Services [Tax Court of South Africa] [2010] Case No. 12041, there was a dispute. The Commissioner had disallowed audit fees and the judgment held that the auditing of financial expenditure incurred is not unnecessarily attached to the performance of the uttermost intervening operations.  This is just illustrating Madam Chair that the fees that are off there are not justified. I also want to refer to the case of

Port Elizabeth Trucking Company Ltd vs CIR 1936 [Cape of Provincial Division] 241 page 46 where it was judged that the expenses are attached to the performance of the incorporation if they are bona fide. So the key word there is bona fide. It means if you are going to buy your small house chicken slice, it is not allowed, but if it is a bona fide thing and all expenses are attached to the performance of the business operations for the purpose of earning income, are deductable expenses and such expenses are necessary.

So I thought I have to allay those fears. I thank you very much.

Amendment to clause 31 put and agreed to.

Clauses 36 – 43 put and agreed to.

On Clause 44:

THE MINISTER OF FINANCE (MR. BITI): This is another

one which caused a lot of controversy when we parked the Bill for consultations. We have received a lot of consultations on this Bill. This provision is dealing with taxation of mining companies. The current law is that when a mining company incurs losses those losses are carried out ad infinitum so you can continue carrying over the losses. So what we had sought in this Bill is to limit the period in respect of which you can carry over losses to 6 years which is what we are doing for every other industry.

The reason why we have thought of doing that is because of the creative accounting that you find in some mining houses but on representations and considering the limping state of our mining sector, we have agreed to revert back to the current law where the losses can be carried over ad infinitum. I want to say Madam Chair, it is one of the concessions that I said I will make when I addressed the Budget Committee. So, with those few remarks Madam Chair, I move the amendment standing in my name that:

On page 36 of the Bill, delete sub-clauses (4) and (5) on lines 36 to

44 inclusive and substitute the following sub-clauses:

“(4) Except in the case of an assessed loss or any7 part thereof arising from mining operations, no part of an assessed loss that was incurred more than six years before the current year of assessment shall be carried forward under subsection (1).

(5) No assessed loss attributable to business operations carried on by a taxpayer shall be allowable as a deduction from income received by or accruing to him or her under a contract of employment.”

Amendment to clause 44 put and agreed to.

Clause 44 as amended, put and agreed to.

THE MINISTER OF FINANCE (MR. BITI): I move the amendment in my name that:

On page 36 of the Bill, delete sub-clauses (4) and (5) on lines 36 to 44 inclusive and substitute the following sub clauses:

  • Except in the case of an assessed loss or any part thereof arising from mining operations, no part of an assessed loss that was incurred more than six years before the current year of assessment shall be carried forward under subsection (1).
  • No assessed loss attributable to business operations carried on by a taxpayer shall be allowable as a deduction from income received by or accruing to him or her under a contract of employment.

Amendment to Clause 44, put and agreed to.

Clause 44 as amended, put and agreed to.

Clauses 45 to 47 put and agreed to.

On Clause 48:

THE MINISTER OF FINANCE (MR. BITI): We received

representation on this and we are making concessions.  I do not want to bother you about the technicalities save that Hon. Chinyadza and team will be very pleased about it and of course the capitalist out there.

So, I move the amendment in my name that:

On pages 37 and 38 of the Bill, delete subclause (2) on lines 39 to 44 of page 37 and on lines 1 to 6 of page 38, and substitute:

“(2) No deduction is allowed for any expenditure on general administration and management in favour of which the taxpayer is a subsidiary, branch or holding company or (where the company is a foreign company) the local branch, where the expenditure exceeds-

  • nought comma seven five per centum of the amount obtained by applying the formula set out in paragraph 5 (“calculation of maximum amount deductible by company for general administration and management”) of the Fourth Schedule

(“Miscellaneous Calculations”). Where the expenditure was incurred before the taxpayer commenced business or produced income or during any period of non-production;

  • one per centum of the amount obtained by applying the formula set out in the paragraph 5 of the Fourth Schedule, where the expenditure was incurred after the taxpayer commenced business or produced income.”

Amendment to Clause 48, put and agreed to.

Clause 48 as amended, put and agreed to.

On Clause 49:

THE MINISTER OF FINANCE (MR. BITI):  I move the minor amendment in my name that:

On page 38 of the Bill, delete paragraph (k) on lines 32 to 34 and substitute the following paragraph:

“(k) any expenditure incurred in the production of income consisting of interest payable by-

  • any bank, discount house or finance house registered or

required to be registered in terms of the Banking Act

[Chapter 24:20]; or

  • any building society registered or required to be

registered in terms of the Building Societies Act

[Chapter 24:02];

In respect of any loan to or deposit with that bank, discount house, finance house or building society.” Amendment to Clause 49, put and agreed to.

Clause 49 as amended, put and agreed to.

Clauses 50 to 60 put and agreed to.

On Clause 61:

THE MINISTER OF FINANCE (MR. BITI): Madam Chair, I

move the amendment in my name.  It is a very important amendment but it is self explanatory that:

On page 42 of the Bill, in subclause (2)(a), delete from line 15 “or doubtful”.

Amendment to Clause 61, put and agreed to.

Clause 61 as amended, put and agreed to.

Clause 62 put and agreed to.

On Clause 63:

THE MINISTER OF FINANCE (MR. BITI): The issue of

valuation of benefits in kind was another one which received representations, which we have conceded and I therefore move the amendment in my name that:

On page 42 of the Bill, in subclause (1), delete from line 37 the words “For the purposes of this Act,” and substitute “Except to the extent provided in the Fourth Schedule, for the purposes of this Act”.

On page 42 of the Bill, in sub clause (2), delete from line 39 words

“The market value of a benefit in kind” and substitute “Except to the extent provided in the Fourth Schedule, the market value of a benefit in kind”.

Amendment to Clause 63, put and agreed to.

Clause 63 as amended, put and agreed to.

Clauses 64 to 66 put and agreed to.

On Clause 67:

THE MINISTER OF FINANCE (MR. BITI): What we are

seeking to do here is that we are seeking the reference to death in that section so that taxation of death remains covered under the Estate Duty

Act.  Again, it is an area that we received representations.  I thank you Madam Chair after moving that the amendment be adopted that:

On page 43 of the Bill, in the definition of “disposal” in subclause (1), delete from paragraph (b) of that definition the words “or at death” in line 37.

Amendment to Clause 67, put and agreed to.

Clause 67 as amended, put and agreed to.

Clauses 68 to 69 put and agreed to.

On Clause 70:

THE MINISTER OF FINANCE (MR. BITI): This is just

clarifying the method of converting balances from the 1st of January, 2009 when we dollarized.  So, I move the amendment standing in my name that:

On page 45 of the Bill, insert the following subclause after subclause (8) ending on line 25:

“(9) The cost base of a business property acquired on or before the 1st January, 2009, shall be the amount resulting from the conversion of the Zimbabwe dollar equivalent of the business property to its United

States equivalent as calculated in accordance with the “Provisional

General Ruling on Conversion of Closing Balances for Tax Purposes” published under the Revenue Authority Act in General Notice 274 of

2010;”

Amendment to Clause 70, put and agreed to.

Clause 70 as amended, put and agreed to.

Clauses 71 to 72 put and agreed to.

On Clause 73:

THE MINISTER OF FINANCE (MR. BITI): This is just

replacing old terminology to move with the simplification that we are trying to do.  So with that clarification, I move the amendment in my name that:

On page 46 of the Bill, in sub clause (3)(a), delete from line 17

“written down value” and substitute “income tax value”.

Amendment to Clause 73, put and agreed to.

Clause 73 as amended, put and agreed to.

Clauses 74 to 91 put and agreed to.

On Clause 92:

THE MINISTER OF FINANCE (MR. BITI):  Madam Chair

that is just a minor amendment which is simply correcting the referencing of the Clause. So, I move the amendment standing in my name that:

On page 54 of the Bill, in subclause (1), delete from line 44

“section 89 (2)” and substitute “section 91(2)”.

Amendment to Clause 92, put and agreed to.

Clause 92 as amended, put and agreed to.

Clause 93 put and agreed to.

On Clause 94:

THE MINISTER OF FINANCE (MR. BITI):  This is an

important amendment even though it appears so innocuous.  What we are simply trying to do there is to provide a clause which prevents income splitting by other taxpayers other than individuals.  So, for individuals it is fine but, once corporates start doing it, there is room for evasion and avoidance and that is all that we are seeking to do there.

I therefore move the amendment standing in my name that:

On page 55 of the Bill, insert the following subclause after subclause (3) ending on line 29:

“(4) Section 75 (“Income splitting” applied to a taxpayer other than an individual which attempts to split income with an associate.”.

Amendment to Clause 94, put and agreed to.

Clause 94 as amended, put and agreed to.

Clauses 95 to 110 put and agreed to.

On Clause 111:

THE MINISTER OF FINANCE (MR. BITI):  Vision for self assessment is very important because we have to trust some taxpayers but what we are simply doing there in Clause 111, is again correcting an error in referencing sections talking to the other. I move the amendment that:

On page 64 of the Bill, in subclause (5), delete from line 21 “Part

I” and substitute “sections 106 and 113”.

Amendment to Clause 111, put and agreed to.

Clause 111 as amended, put and agreed to.

Clauses 112 to 115 put and agreed to.

On Clause 116:

THE MINISTER OF FINANCE (MR. BITI): I move for the

amendment on Clause 116A, which is inserting a new provision to provide for tax adjustments in relation to transition from the current Act. That is basically a transitional provision. I move the amendment in my name that:

On page 66 of the Bill, insert in Part III (“Amended Assessments”) of Chapter X (“Returns and Assessments”) after clause 116 ending on line 30 the following new clause:

“116A Adjustment of tax, etc., payable in pursuance of assessments made before date of commencement of charging Act relating to a year or period of assessment

  • The tax with which a person is chargeable in pursuance of an assessment which is made in respect of a year or period of assessment before the date of commencement of the charging Act relating to that year or period shall be calculated as if the last enacted charging Act were the charging Act relating to that year or period.
  • After the date of commencement of the charging Act relating to a year or period of assessment, the Commissioner shall adjust the tax with which a person is charged or the tax paid by a person in pursuance of an assessment referred to in subsection (1) if an adjustment is required by reason of the making of provision in that Act which is different from that made in the charging Act by reference to the provisions of which the tax so charged or paid was calculated.
  • On an adjustment made in terms of subsection (2), any

amount over or short paid shall be refundable to or recoverable from the taxpayer.

  • Notwithstanding subsection (2), the Commissioner shall not make an adjustment such as is referred to in that subsection if the Commissioner is of the opinion that an adjustment would be impracticable or cause undue delay in winding up the affairs of a trust”.

Amendment to Clause 116 as amended, put and agreed to.         Clause 116 as amended, put and agreed to          Clauses 117 to 137 put and agreed to.

On Clause 138:

THE MINISTER OF FINANCE (MR. BITI): The amendment

we seek in Clause 138, provides for tax credit where taxes withheld and also, for payment dates when withheld tax should be remitted to the Commissioner. It is a very important provision and I move the amendments in my name that;

On page 74 of the Bill in subclause (1), insert in the definition of “fees” the following paragraphs after paragraph (d) ending on line 44:

“or

  • any project which is specified for the purposes of this subparagraph by the Minister by notice in a Statutory Instrument; or
  • any project which is the subject of any agreement entered into by the Government of Zimbabwe with any other government or international organisation in terms of which any person is entitled to exemption from tax in respect of such amount.”

On page 75 of the Bill, in subclause (2), delete from lines 4 and 5 the words “on or before the tenth day of the month following that in which the payment or remittance, as the case may be, was made” and substitute “within ten days of the date of the making of the payment or remittance, as the case may be”.

On page 75 of the Bill, insert the following subclauses after subclauses (3) ending on line 8:

“(4) If any person who is not ordinarily resident in Zimbabwe and to whom fees have accrued during the year of assessment proves to the satisfaction of the Commissioner that non-residents’ tax on fees has in terms of the Schedule been withheld and paid from such fees, such nonresidents’ tax on fees shall, subject to subsection (2), be allowed as a credit against income tax chargeable in terms of this Act in respect of those fees and the income tax so chargeable shall be reduced accordingly.

(5) Any reduction granted in terms of subsection (4) shall be  subject to the provisions set out in this subsection –

  • A reduction in income tax shall not exceed an amount arrived at by applying the following formula -

A – B

in which –

  1. represents the income tax which would have been payable in terms of this Act had no reduction been granted in respect of fees from which non-residents’ tax on fees has been withheld

and paid;

  1. represents the income tax which would have been payable had the fees from which non-residents’ tax on fees has been

withheld not been included in taxable income;

  • the total deduction to be allowed to any person for any year of assessment shall not exceed the total income tax chargeable in terms of this Act in respect of that year of assessment.”.

Amendment to Clause 138, put and agreed to.

Clause 138 as amended put and agreed to.

On Clause 139:

THE MINISTER OF FINANCE (MR. BITI): I move the  amendment standing in my name that:

On page 75 of the Bill, in subclause (1), delete from lines 12 and

13 the words “on or before the tenth day of the month following that in which the amount was paid” and substitute “within ten days of the date of payment”.

Amendment to Clause 139, put and agreed to.

Clause 139 as amended, put and agreed to.

On Clause 140:

THE MINISTER OF FINANCE (MR. BITI): This is a very  important amendment. The current law is that if someone loans money to Zimbabwe and the money earns interest, we do not tax that interest. In the Bill, we had, perhaps unwisely, tried to tax the interest. If we do that, then it means we will not have a lot of people wanting to lend money to Zimbabwe when their interest is going to be taxed. It is one of the recommendations that came from the Committee. We have accepted that and we are going to allow the retention of the current status quo where we do not tax interest due to non-resident persons on amounts advanced to Zimbabwe. I therefore move the amendments in my name that;

On page 75 of the Bill, in subclause (1), in the definition of

“interest”, insert the following subparagraph delete subparagraph (iv) of paragraph (b) on line 37 and substitute the following subparagraphs:

(iv) interest paid to a non-resident person; or        (v)    interest as may be prescribed.”.

On page 75 of the Bill, in subclause (2), delete from lines 39 and

40 the words “on or before the tenth day of the month following that in which the payment was made” and substitute “within ten days of the date when the payment was made”.

Amendment to Clause 140, put and agreed to.

Clause 140 as amended, put and agreed to.

On Clause 141:

THE MINISTER OF FINANCE (MR. BITI): Again, an

important amendment but this time we are now dealing with royalties. This amendment seeks to provide for some tax credit where tax is withheld and also providing for the payment date of such taxes. I therefore move the amendment in my name that;

On page 76 of the Bill, in subclause (1), delete from lines 4 and 5 the words “on or before the tenth day of the month following that in which the amount was paid” and substitute “within ten days of the date of payment”.

On page 76 of the Bill, insert the following subclauses after subclause (2) ending on line 8:

“(3) If any person who is not ordinarily resident in Zimbabwe and to whom royalties have accrued during the year of assessment proves to the satisfaction of the Commissioner that non-residents’ tax on royalties has in terms of this section been withheld and paid from such royalties, such non-residents’ tax on royalties shall, subject to subsection (4), be allowed as a credit against income tax chargeable in terms of this Act in respect of those royalties and the income tax so chargeable shall be reduced accordingly.

(4) Any reduction granted in terms of subsection (3) shall be subject to the provisions set out in this subsection –

  • a reduction in income tax shall not exceed an amount arrived at by applying the following formula –

A – B

in which –

  1. represents the income tax that would have been payable in terms of this Act had no reduction been granted in respect of royalties from which non-residents’ tax on royalties has been

withheld and paid;

  1. represents the income tax that would have been payable had the royalties from which non-residents’ tax on royalties has been withheld not been included in taxable income;
  • the total deduction to be allowed to any person for any year of assessment shall not exceed the total income tax chargeable in terms of this Act in respect of that year of assessment.”.

Amendment to Clause 141, put and agreed to.

Clause 141 as amended, put and agreed to.

Clause 142, put and agreed to.

On Clause 143:

THE MINISTER OF FINANCE (MR. BITI): Similar with the

last two provisions, this is also providing tax credit and the payment date but this time, in respect with insurance commission tax. The other two amendments were for tax on royalties and tax on interest. I move the amendment that;

On page 77 of the Bill, insert the following subclause after subclause (3) ending on line 24:

“(4) If any freelance agent proves to the satisfaction of the Commissioner-General that tax has been withheld from his or her commission in terms of this section during the year of assessment and paid in accordance with this section, such tax shall be allowed as a credit against income tax chargeable in terms of this Act in respect of that commission, and the income tax so chargeable shall be reduced accordingly and any excess refunded.”.

Amendment to Clause 143, put and agreed to.

Clause 143 as amended, put and agreed to.

On Clause 144:

THE MINISTER OF FINANCE (MR. BITI): Further bonus to

the rich, we are providing for tax credit where tax has been withheld and we are also providing for the dates of the payment of the tax. I therefore move the amendments in my name that:

On page 77 of the Bill, in subclause (2), delete from line 32 the words “on or before the tenth day of the month following that in which the payment was made” and substitute “within ten days of the date of when the payment was made”.

On page 77 of the Bill, insert the following subclause after subclause (4) ending on line 44:

“(5) If any non-executive director proves to the satisfaction of the Commissioner-General that tax has been withheld from his or her fees in terms of this section during the year of assessment and paid in accordance with this section, such tax shall be allowed as a credit against income tax chargeable in terms of this Act in respect of those fees, and the income tax so chargeable shall be reduced accordingly and any excess refunded.”.

Amendment to Clause 144, put and agreed to.

Clause 144 as amended, put and agreed to.

Clause 145, put and agreed to.

On Clause 146:

THE MINISTER OF FINANCE (MR. BITI): We are simply

correcting the heading of the clause and also inserting some words. We are dealing with some omissions that had been made. This is largely editorial and I move the amendments in my name;

On page 78 of the Bill, delete the heading to clause 146 on line 43 and substitute “146 Money transfer tax and automated financial transactions tax”:

On page 79 of the Bill, in subclause (1) delete on lines 4 and 5 the definition of financial institution” and substitute the following:

““financial institution” means any entity referred to in paragraph

(a) to (i) of the definition of that term in section 2(1);”.

On page 79 of the Bill, insert the following subclauses after subclause (6) ending on line 31:

“(7) Whenever a customer of a financial institution –

  • withdraws cash from his or her account with the institution;

or

  • effects any debit on his or her account with the institution; by means of automated teller machine, the financial institution concerned shall pay to the Commissioner an automated financial transactions tax on each such transaction.

(8)  Automated financial transactions tax shall be paid in terms of subsection (7) not later than the tenth day of the month following the month in which the transaction in respect of which the tax is payable was effected:

Provided that the Commissioner may for good cause allow the tax to be paid within a further time.”

Amendment to Clause 146, put and agreed to.

Clause 146 as amended, put and agreed to.

On Clause 147:

THE MINISTER OF FINANCE (MR. BITI): This is again

largely editorial. The clause is specifying withholding taxes which are final taxes and hence, have no credit. I move the amendment in my name:

On page 79 of the Bill, delete the heading to clause 147 on line 31 and substitute “147 Finality and exclusivity of certain taxes under this Part; credits for non-final withholding taxes”:

On page 79 of the Bill, delete from line 35 the text “sections 137, 139, 140, 142 and 145” and substitute “sections 137, 138, 141, 143 and 144”.

On page 79 of the Bill, insert the following subclause to clause 147 ending on line 39:

“(2) Where a payee receives a payment from which tax has been withheld under section 137, 138, 141, 143 or 144, each of such taxes withheld shall entitle the payee to the appropriate credit specified in those sections.”

Amendment to Clause 147, put and agreed to.

Clause 147 as amended, put and agreed to.

Clause 148 put and agreed to.

On Clause 149:

THE MINISTER OF FINANCE (MR. BITI): It is a minor

amendment and like the previous one, we are just providing for the date of the payment of that tax withheld by an agent. I move the amendment in my name that:

On page 80 of the Bill, delete from lines 4 and 5 the words “on or before the tenth day of the month following that in which the amount was paid” and substitute “within ten days of the date of payment”.

On page 80 of the Bill, insert the following subclauses after line 6, the existing clause becoming subclause (1):

“(2) For the purposes of this section, a person shall be deemed to be the agent of a payee and to have received fees on behalf of that payee

if –

  • that person’s address appears in the payer’s records as the address of the payee; and
  • the warrant or cheque in payment of the fees is delivered at that person’s address.

(3) Any person deemed to be the agent of a payee in terms of  subsection (2) shall, as regards the payee and in respect of any income received by or accruing to or in favour of the payee, have and exercise all the powers, duties and responsibilities of an agent for a taxpayer absent from Zimbabwe.”.

Amendment to Clause 149, put and agreed to.

Clause 149 as amended put and agreed to.

On Clause 150:

THE MINISTER OF FINANCE (MR. BITI): Again a minor amendment, we are just providing for the dates where payment of the withheld taxes is made. I move the amendment in my name that:

      On page 80 of the Bill, delete from lines 9 and 10 the words “on or before the tenth day of the month following that in which the amount was paid” and substitute “within ten days of the date of payment”.

Amendment to Clause 150, put and agreed to.

Clause 150 as amended, put and agreed to.

           Clause 151 to 160 put and agreed to.

On Clause 161:

THE MINISTER OF FINANCE (MR BITI):  That is just a

minor amendment. We are simply correcting referencing error. I therefore, move the amendment in my name that:

On page 83 of the Bill, in subclause (2), delete from line 43 “Part

XX” and substitute “Part III”.

Amendment to Clause 161, put and agreed to.

Clause 161 as amended, put and agreed to.

On Clause 162:

THE MINISTER OF FINANCE (MR BITI): It is just a minor amendment. I therefore move the amendment in my name that:

On page 84 of the Bill, in the title to this Clause, delete

“Collective” from line 1 and substitute “Collection of”.

Amendment to Clause 162, put and agreed to.

Clause 162 as amended, put and agreed to.

Clauses 163 to 205 put and agreed to.

On Clause 206A:

THE MINISTER OF FINANCE (MR BITI): I want to say that

this is an important provision. It deals with the setting up of the Fiscal Court of Appeal and Appeals to the Supreme Court. What we have done here is that the system is clogged with so many appeals that are pending before the Fiscal Appeals Court. When judgments are belatedly made, they go to the Supreme Court where factual disputes are still an issue.

What we are trying to do here is to place the Fiscal Appeals Court at par with the Labour Court to the extent that appeals from the Fiscal Appeals Court, which is the equivalent of our High Court, when they go to the Supreme Court, it is on a question of law. That is what it is doing. What is happening in this provision is that we are allowing the Fiscal Appeals Court to appoint assessors. Judges there can also sit with assessors.

I beg your indulgence in that I want to put Section 206A (1) (a) and (b) and (3) but if we can remove Subsection (2). Subsection (2) is the provision that purports to say that when a tax appeal is heard, the

Supreme Court must sit in camera. That is clearly unconstitutional. If on Section 206A you can remove Subsection (2). I am praying that it be adopted by this House is Section 206A (1), Subsection (a) and (b) and then (3) which becomes your (2). With that amendment I move the amendment in my name that:

On page 101 of the Bill, insert Chapter XVII (“Objections and

Appeal”) after Clause 206 ending on line 8 the following new Clauses:

206A Appeals from determination of Fiscal Appeal Court to

Supreme Court; assessors

(1)  On the determination by the Fiscal Appeal Court of an appeal under Section 206 or other proceedings incidental to

or connected therewith, the appellant or the Commissioner, if dissatisfied with the determination –

  • may appeal to the Supreme Court on any ground of appeal which involves a question of law alone;
  • may, with leave of the President of the Fiscal Appeal Court, or, if such President refuses to grant leave, with the leave of a judge of the Supreme Court, appeal to the Supreme Court on any ground of appeal which involves a question of fact alone or a question of mixed law and fact

(2) For the hearing of any appeal under this Chapter, the presiding judge or a President of the Fiscal Appeal Court may, either of his or her own motion or on the application of either party, appoint one or two assessors to advise at such a hearing. Any assessor appointed in terms of this section shall act in a purely advisory capacity and shall have no right to vote on any decision.

Amendment to Clause 206 A, put and agreed to.

Clause 206A as amended, put and agreed to.

On Clause 206B:

THE MINISTER OF FINANCE (MR BITI): That is an

important one. What we have seen in the past is that when a tax matter goes before the Fiscal Appeals Court, some naughty litigants have argued that judges cannot hear the matter because they are an interested party to the extent that you are a taxpayer but we are all taxpayers. We are removing that frivolous and vexatious potential ground of asking a judge to recuse himself and that is what we are doing. I move the amendment standing in my name

that:

206B Judge and assessors not disqualified from adjudicating or advising

A judge of the Supreme Court or a President of the Fiscal

Appeal Court or any assessor of any such courts shall not, solely

on account of his liability to pay tax under this Act, be deemed to be interested in any matter upon which he or she may be called upon to adjudicate or advise thereunder”.

Amendment to Clause 206 B, put and agreed to.

Clause 206B as amended, put and agreed to.

Clause 207 put and agreed to.

On Clause 208:

THE MINISTER OF FINANCE (MR BITI): This is just a

common provision in our statutes. The minister has got the power by the Statutory Instrument to fix the rate of interest covered by the law. This is very important in that one of the complaints that we are getting from our business people is that the tax collector is charging 100% interest rates. We are giving the discretion to the Executive so that in a dollarised environment, you cannot put 100% on US$200 000. It does not make sense. This provision is a concession from the public that gave us representations. I move the amendment standing in my name that:

“208A Calculation and fixing of interest payable under this Act

  • Where –
    • any interest is payable under Section 207 or 208; and
    • the rate at which such interest is payable has with effect from any date been altered; and
    • such interest is payable in respect of any period or any number of months or any part of a month which commenced before the said date;

The interest to be determined in respect of that portion of such which ended immediately before the said date or in respect of any such months or part of a month which commenced before the said date shall be calculated as if the said rate had not been so altered.

  • The Minister may, by statutory instrument, alter any rate of interest specified in this Act, and in doing so may substitute a specific rate by a variable rate applicable to the borrowing of funds in any international money market, such as the LIBOR.
  • Where the Minister substitutes any rate of interest specified in this Act by a variable rate referred to in Subsection (2), the Commissioner-General may, in terms of the Fourth Schedule to the Revenue Authority Act, issue binding general rulings on the tax consequences of any variation of such rate.”

Amendment to Clause 208 A, put and agreed to.

Clause 208A as amended, put and agreed to.

Clauses 209 to 211, put and agreed to.

On Clause 212A:

THE MINISTER OF FINANCE (MR BITI): This is just a

deterrent clause. We are seeking to say that if you are a habitual and regular offender, you have led yourself astray from the path of virtue; the penalties must also be increased if you are a continuous regular offender. I move the amendment in my name that:

212A Offences; increased penalty on subsequent conviction

If, upon conviction of any person for an offence under

Section 209, 210 or 212 for –

  1. failing or neglecting to furnish, file or submit any return or document required by the Commissioner; or
  2. refusing or neglecting to furnish any information or reply, or to produce any books or papers required of him by the

Commissioner or any other officer; within any reasonable period fixed by the Commissioner or any other officer and of which notice has been given to him by the Commissioner, it is proved that that person has been previously convicted of a like failure, neglect or refusal in relation to the same return, document, information, reply, books  or papers, then such person shall, in addition to any punishment inflicted under such section, be liable also to a fine not exceeding level one for each

day that he or she is in default, or to imprisonment for a period not exceeding twelve months.”

Amendment to Clause 212A, put and agreed to.

Clause 212A as amended, put and agreed to.

Clauses 213 to 219, put and agreed to.

On Clause 220:

THE MINISTER OF FINANCE (MR BITI): The previous draft

says that ZIMRA would make regulations. On reflection, we felt that in its formative stages, this Act will require careful guidance by the Executive. Therefore, we felt that we should revert to the current position where it is the minister that makes regulations and not the tax collector. I move the amendment in my name that:

On page 106 of the Bill, delete subclause (1) between the lines 34 to 37 inclusive and substitute the following:

“(1) The Minister may make regulations prescribing anything which under this Act is required or permitted to be prescribed or which, in the Minister’s opinion, is necessary or convenient to be prescribed for carrying out or giving effect to this Act”.

On page 107 of the Bill, delete subclause (3) on lines 3 to 4.

Amendment to Clause 220, put and agreed to.

Clause 220 as amended, put and agreed to.

Clauses 221 to 222 put and agreed to.

On Clause 223:

THE MINISTER OF FINANCE (MR. BITI):  This is a very important amendment Madam Speaker.  What 223 is now doing is to repeal the Capital Gains Tax Act because what this Act has done is to simply treat Capital Gains as part of ordinary income which a tax payer earn on the disposal of an asset.  So that provision Madam Speaker is a very important one.  I will speak later on Madam Speaker, on the kind of harmonisation which we have done between the Capital Gains Tax and this new Act arising from that horrible period which we had of the hyperinflationary error.  When you sold your house, you were not sure whether you were making a capital gain.  I will speak on that later on.  I thank you Madam Speaker.

Amendment to Clause 223 put and agreed to.

Clause 223 as amended, put and agreed to.

Schedules 1 – 3 put and agreed to.

On Schedule 4:

THE MINISTER OF FINANCE: Madam Speaker, this is

another area as well that the committee on the Budget will be pleased to hear.  What we sought to do in the initial draft was to create a very complicated calculation of the motor vehicle benefit.  So we tried to force employers to keep the log books.  So if the vehicle has travelled five kilometres or twenty kilometres, you keep a log book, then we will calculate on the basis of how many kilometres the vehicle has moved and then calculate the benefit.  If in a year you have moved 20 thousand kilometres, we apply the formula in the Bill.

Now, this is a nightmare as you can understand.  So we have conceded to the committee’s view that we should simplify it and in simplifying it, we have gone back to the calculations defined in the current law which we deem the benefit.  I know that Hon. Chinyadza will be very pleased and with this, I pleasurably move the amendment in my name that:

On page 130 of the Bill, in paragraph 1 (3), delete paragraph (c) on lines 22 and 24 inclusive.

On page 130 of the Bill, delete paragraph 2 between lines 25 and

40 inclusive, and substitute the following:

“Calculation of motor vehicle benefit”

  1. The amount to be included in employment income as a motor vehicle benefit under section 23 (1) (j) (ii) shall be the cost to the employer as deemed by the following paragraphs –
  • the amount prescribed in the Ninth Schedule, in the case of a motor vehicle whose engine capacity does not exceed one thousand five hundred cubic centimeters;
  • the amount prescribed in the Ninth Schedule, in the case of a motor vehicle whose capacity exceeds one thousand five hundred cubic centimeters but does not exceed two thousand cubic centimeters;
  • the amount prescribed in the Ninth Schedule, in the case of a motor vehicle whose capacity exceeds two thousand cubic centimeters but does not exceed three thousand cubic centimeters;
  • the amount prescribed in the Ninth Schedule, in the case of a motor vehicle whose capacity exceeds three thousand cubic centimeters; and such deemed cost shall be reduced proportionally where the period of use of the motor vehicle is less than the year of assessment”.

On page 132 of the Bill, in paragraph 5 (“Calculation of maximum amount deductible by a company for general administration and management”), delete from subparagraph (d) the words “paragraph 2

(1)” on lines 9 and 10 and substitute “paragraph 15 (1)”.

On page 132 of the Bill, in paragraph 5 (“Calculation of maximum amount deductible by a company for general administration and management”), delete the text between lines 13 and 23 inclusive, and

substitute the following:

“is calculated according to the following formula –

A – (B + C)

Where –

A is the total expenditure qualifying for deduction in terms of Part

IV of Chapter IV;

  • represents the expenditure on general administration and management paid outside Zimbabwe by such local branch or subsidiary, whether or not such expenditure was incurred by the head office of that foreign company;
  • is the amount of expenditure qualifying for deductions in respect of any mining operation, special mining lease operation or petroleum operation carried on by the taxpayer.”

Amendment to Schedule 4, put and agreed to.

Schedule 4 as amended, put and agreed to.

On Schedule 5:

THE MINISTER OF FINANCE (MR. BITI):  This is just

correcting a referencing error.  So it is a draft amendment and I put the amendment standing in my name that:

On pages 136 of the Bill, delete paragraph 3 between lines 6 to 8 inclusive and renumber the subsequent paragraphs accordingly.

Amendment to Schedule 5 put and agreed to.

Clause 5 as amended, put and agreed to.

Schedule 6 put and agreed to.

On Schedule 7:

THE MINISTER OF FINANCE (MR. BITI):  I move the amendments standing in my name that:

On pages 142 of the Bill, insert after the definition of “benefit fund” ending on line 41 the following definitions:

“”dwelling means a building, or any part of a building, which is used wholly or mainly for the purpose of residential accommodation;

“marketable security” means –

  • any bond capable of being sold in a share market or exchange; or
  • any –
    • debenture, share or stock; or
    • right possessed by reason of a person’s participation in any unit trust; whether or not capable of being sold in a share market or exchange;

“principal private residence”, in relation to an individual, means –

  • a dwelling which is proved to the satisfaction of the

Commissioner –

  • to have been that individual’s sole or main residence throughout the period that he or she owned it; or
  • to have been that individual’s sole or main residence for a period of four years or more immediately before the date of its sale, or for such shorter period immediately before the date of its sale as the Commissioner considers reasonable in all the circumstances; or
  • to have been regarded by that individual as his or her sole or main residence, even though he or she was prevented from residing in it as provided in subparagraph (i) or (ii) in consequence of his or her employment or for such other cause as the

Commissioner considers reasonable in all the circumstances; and

  • Subject to paragraph 13 (5), any land, whether or not it is a piece of land registered as a separate entity in a Deeds

Registry, which –

  • is owned by the individual concerned; and
  • surrounds or is adjacent to the dwelling referred to in paragraph (a); and
  • is used by the individual concerned primarily for private or domestic purposes in association with the dwelling referred to in paragraph (a); and
  • does not exceed two hectares or such larger area as the Commissioner, having regard to the size and character of the dwelling referred to in paragraph (a), is satisfied

is required for the reasonable enjoyment of the dwelling as a principal private residence; and

  • subject to paragraph 13 (5), any garage, storeroom or other building or structure which –
    • is owned by the individual concerned; and
    • forms part of or is attached to or otherwise associated with the dwelling referred to in paragraph (a); and
    • is used by the individual concerned primarily for private or domestic purposes in association with the dwelling referred to in paragraph (a); and concludes a residential stand intended for the building of a principal private residence thereon;

“residential stand”, in relation to an individual, means any land, whether or not it is a piece of land registered as a separate entity in a Deeds Registry, which –

  • is owned by the individual concerned; and
  • is proved to the satisfaction of the Commissioner to be intended for the building of a principal private residence thereon.”

On pages 142 and 143 of the Bill, delete the definitions of “industrial park” (lines 42-45 on page 142 and lines 1-3 on page 143) and “industrial park developer” (lines 4-5 on page 143)

On page 143 of the Bill, in paragraph (a) of paragraph 4 (“Income of companies, funds, trusts and associations”) insert after “the private pecuniary profit or gain of their members” on line 43 the words, “except to the extent that income is derived from the disposal of immovable property or marketable securities”.

On page 144 of the Bill, in paragraph (c) of paragraph 4 (“Income of companies, funds, trusts and associations”) insert after “approved by the Commissioner” on line 11 the words, “except to the extent that income is derived from the disposal of immovable property or marketable securities”.

On page 144 of the Bill, in paragraph (f) of paragraph 4 (“Income of companies, funds, trusts and associations”) insert after “approved by the Commissioner” on line 11 the words, “except to the extent that income is derived from the disposal of immovable property or marketable securities”.

On page 147 of the Bill, in subparagraph (13) of paragraph 7

(“Payments relating to employment”) delete from lines 19 and 20 the words “four hundred United States dollars” and substitute “one thousand

United States dollars”.

On page 149 of the Bill, in paragraph 11 (“Miscellaneous payments”), delete subparagraph (2) on lines 31 and 35 inclusive, and renumber subparagraph (3) as subparagraph (2).

0n page 149 of the Bill, insert the following paragraphs after paragraph 12 ending on line 46:

“Income from disposal of principal private residence

  1. (1) Subject to this paragraph, an amount or income accruing from the disposal by a taxpayer of his or her principal private residence –

(a)   if such taxpayer is, on the date of the disposal of his or her principal private residence, or over the age of fifty-five years; or

If such taxpayer is, on the date of the disposal of his or her principal private residence, under the age of fifty-five years, and the amount or income is used in the acquisition of another principal private residence in accordance with the following subparagraphs of this paragraph.

(2)  An individual taxpayer may elect that, where an amount or income has been received by or has accrued to him or her on or after the 1st April, 1988, in respect of the sale by the taxpayer of his or her principal private residence (hereinafter in this paragraph called the “old principal residence”) and the Commissioner is satisfied that, before the end of the year of assessment next following the sale, an amount equal to the whole or part of the consideration received or accrued in respect of the sale has been or will be expended on the purchase or construction, on land owned by the taxpayer in Zimbabwe, of another principal private residence (hereinafter in this paragraph called the “new principal private residence”) for the taxpayer concerned –

  • income tax shall not be chargeable, if the amount of the consideration so received or accrued is equal to or less than the amount so expended; and
  • income tax shall be chargeable, if the amount of the consideration so received or accrued exceeds the amount so expended, on a proportion of the net gain determined by applying the following formula –

A x C

B

in which –

  • represents that proportion of the amount of the consideration received or accrued on the sale of the old principal private residence not so expended on the purchase or construction of the new principal private residence;
  • represents the total amount of the consideration received or accrued on the sale of the old principal private residence;
  • represents the net gain in respect of the sale of the old principal private residence.
  • An election in terms of subparagraph (2) shall be made not later than the date on which the individual making the election submits a return for the assessment of his or her income for the purposes of this Act.
  • For the purposes of this paragraph, where –
    • a building owned by a company, partnership or association, as the case may be, have the right, by virtue of their membership, to occupy particular flats, apartments or units of residential accommodation in the building;
    • the members of the company, partnership or association, as the case may be, have the right, by virtue of their membership, to occupy particular flats, apartments or units of residential accommodation in the building; an individual who, by becoming or ceasing to be a member of the company, partnership or association concerned, acquires or relinquishes such a right of occupation, shall be deemed to have purchased or sold, as the case may be, the flat, apartment or unit of residential accommodation concerned.
  • Where –
    • land referred to in paragraph (b) of the definition of

“principal private residence” in paragraph 1; or

  • a garage, storeroom or other structures referred to in paragraph (c) of the definition of “principal private residence” in paragraph 1;

is disposed of separately from the dwelling in association with which it was used, this section shall not apply in relation to its disposal.

  • Where a principal private residence is sold together with or as part of other immovable property which is not used wholly or mainly for the purposes of residential accommodation, the proportion of –
  • the gross amount in the hands of the transferor; or
  • the cost of acquisition in the hands of the transferee;

Received or accruing in respect of the sale of the principal private residence shall be deemed to be –

  • such proportion as may be specified by both the parties to the sale in a joint written statement which is submitted to the

Commissioner and which is accepted by him or her; or

  • where no statement has been submitted to the Commissioner in terms of paragraph (c) or where the Commissioner has not accepted such a statement, such proportion as may be determined by the Commissioner to be fair and reasonable.

Disposal of Certain immovable property

  1. An amount or income accruing from the disposal by a taxpayer of investment property in the form of immovable property acquired in Zimbabwe before the 1st February, 2009, that is subject to any withholding tax imposed by the charging Act.

Disposal of certain marketable securities

  1. An amount or income –
  • accruing from the disposal by a taxpayer of investment property in the form of any marketable security that is subject to any withholding tax imposed by the charging Act; or
  • received or accrued on the sale of any marketable security being any bond or stock in respect of any loan to –
  • the State or any company all the shares of which are owned by the State;
  • a local authority;
  • a statutory corporation; or

(c)   received by or accruing to a person who is of or over fifty-five years of age on the sale of any marketable security, in respect of the first one thousand eight hundred United States dollars received by or accruing to him in the year of assessment concerned.

Disposal of immovable property and marketable securities forming part of deceased estate

  1. An amount or income received or accrued on the realisation or distribution by the executor of a deceased estate of any immovable property or marketable security forming part of such estate.

Realisation by life insurance company of certain investments in

Zimbabwe

  1. Income or amounts received or accrued on the sale, by a person carrying on life insurance business as defined in paragraph 1 (1) of the First Schedule, of specified assets which are investments in Zimbabwe for the purposes of factor F or G in the formula in paragraph 6 of that Schedule.

Sales of certain shares in Infrastructure Development Bank of Zimbabwe

  1. Income or amounts received or accrued on the sale of any shares in the Infrastructure Development Bank of Zimbabwe established by section 3 of the Infrastructure Development Bank Act [Chapter 24:14] where such sale is by an institutional shareholder as defined in that Act who is not ordinarily resident in Zimbabwe.

Sale of certain immovable property used for petroleum operations

  1. Income or amounts received or accrued on the sale by a petroleum operator, approved by the Minister by notice in the Gazette, of immovable property used for the purposes of petroleum operations, to another petroleum operator, if the Commissioner is satisfied that the property is to be used for such purposes by the purchaser.

Disposal of shares or interest in approved employee share ownership trust

  1. Income or amounts received or accruing to an employee from the sale or disposal of his or her shares or interest in an approved employee share ownership scheme as defined in paragraph 1 (1) of the Tenth Schedule where such sale or disposal is to the scheme.”.

Madam Speaker, this is an important schedule for most of us.  The amendments we seek are important.  The schedule deals with exemptions from income tax.  So given the fact that there is housing challenges in Zimbabwe, we are seeking to exempt from taxation any principal private residence and residential stands earmarked for the construction of a principal private residence from tax.  So, this is very important.  If you sell your small house or stand in order to develop or buy a bigger one; we are exempting the capital gains tax you are earning.  So, this is to the poor people and not to the capitalists.

Amendments to Schedule 7, put and agreed to.

Schedule 7 as amended, put and agreed to.

On Schedule 8:

THE MINISTER OF FINANCE (MR. BITI):  I move the amendments standing in my name that:

On page 151 of the Bill, in paragraph 1 (1) in the definition of

“commercial building”, delete from line 6 “the date of commencement

st April, 1975”. of this Act” and substitute “the 1

On page 153 of the Bill, delete the definition of “previous law” (limes 19-20).

On page 161 of the Bill, in paragraph 13 (Limitation on cost of passenger motor vehicle delete subparagraph (2) (lines 6-25).

On page 163 of the Bill, delete the definitions of “mineral” (lines 21-27), “mining location” (lines 28-29) and “mining operations” (lines 30 to 43).

Amendments to Schedule 8, put and agreed to.

Schedule 8 as amended, put and agreed to.

On Schedule 9:

THE MINISTER OF FINANCE (MR. BITI):    I move the amendments standing in my name that:

On page 173 of the Bill, insert the following after item 7 on line 7, and renumber the subsequent items accordingly:

  1. Deemed cost to an employer of a motor vehicle benefit in relation to a vehicle of any of the following engine capacity referred to in subparagraphs (a) to (d) of paragraph 2 of the Fourth Schedule –
  • not exceeding 1 500 cc: ……………………………….$1 800
  • exceeding 1 500 cc but not exceeding 2 000 cc: ………$2 400
  • exceeding 2 000 cc but not exceeding 3 000 cc: ………..$3 600
  • exceeding 3 000 cc: …………………………………...$4 800

Madam Speaker, we are just putting in US dollar term the monetary amounts that are deemed benefits.  There is a lacuna at the present moment that the Zimbabwean dollars are still being used.  So that is all we are doing there.

Amendment to Schedule 9 put and agreed to.

Schedule 9 as amended, put and agreed to.

On Schedule 10:

THE MINISTER OF FINANCE (MR. BITI):  I move the amendment standing in my name that:

On page 176 and 177 of the Bill, delete paragraph 8 on lines 27 to 46 on page 176 and lines 1 to 3 on page 177, and renumber the subsequent paragraphs 9, 10 and 11 as paragraphs 8, 9 and 10.

Amendment to Schedule 10, put and agreed to.

Schedule 10 as amended, put and agreed to.

On Schedule 11:

THE MINISTER OF FINANCE (MR. BITI):  I move the amendments standing in my name that:

On page 178 of the Bill, in the title to the Schedule on line 10, delete “138” and substitute “137”.

On page 178 of the Bill, in subparagraph (1) delete the definition of “employee” (lines 16-19).

On page 179 of the Bill, in subparagraph (1) delete the definition of “employer” (lines 31-44).

Amendments to Schedule 11, put and agreed to.

Schedule 11 as amended, put and agreed to.

Schedules 12 to 15 put and agreed to.

Progress reported.

Bill reported with amendments.

Bill referred to the Parliamentary Legal Committee.

ANNOUNCEMENT BY THE SPEAKER

NON-ADVERSE REPORT FROM THE PARLIAMENTARY LEGAL

COMMITTEE

  1. SPEAKER: I have received a Non Adverse Report from the Parliamentary Legal Committee on Income Tax Amendment Bill (H. B.

5, 2012.

Third reading: With leave, forthwith.

THIRD READING

INCOME TAX AMENDMENT BILL (H. B. 5, 2012)

 THE MINISTER OF FINANCE: Mr. Speaker Sir, I move that

the Bill be now read the third time.

Motion put and agreed to.

Bill read the third time.

On the motion of THE MINISTER OF FINANCE, the House

adjourned at Nineteen Minutes to four o’clock p.m.

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