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NATIONAL ASSEMBLY HANSARD 31 AUGUST 2022 VOL 48 NO 74
PARLIAMENT OF ZIMBABWE
Wednesday, 31st August, 2022.
The National Assembly met at a Quarter-past Two O’clock p.m.
(THE HON. SPEAKER in the Chair)
ANNOUNCEMENT BY THE HON. SPEAKER
VISITORS IN THE SPEAKER’S GALLERY
THE HON. SPEAKER: Hon. Members, I want to recognise the presence in the Speaker’s Gallery of the members of staff from the Parliament of Zambia. Thank you very much, you may sit. – [HON. MEMBERS: Hear, hear.] –
FINANCE BILL [H. B. 9, 2022]
First Order read: Committee Stage: Finance Bill [H. B. 9, 2022].
House in Committee.
Clause 1 put and agreed to
On Clause 2:
HON. GONESE: Thank you very much Mr. Chairman. I would like to debate this clause, primarily for the reason that in view of the hyper inflationary environment that we are living in and the Hon. Minister has accepted that this is of the position and also in view of the sentiments which were expressed by various Hon. Members yesterday, I believe that it is imperative for the Hon. Minister to adjust those thresholds because when you look at the figure of $250 000 and you look at it in the context of the real hard currency, you find that figure is very low and I suggest that the figure should be revised upwards.
When we look at the real value of the Zimbabwean dollar when you look at $250 000 per annum and you try to divide that, I think it comes to something just over 20 800 per month. I believe that you must be really talking of perhaps a figure in the region of 300 000 per month which should not be taxed. I propose that if you multiply 300 000 by 12 you get 4.8 million, probably that is the figure we should be talking about after which persons may be taxed and all the other bands would then be adjusted accordingly.
I so submit Hon. Chair, that the Hon. Minister should revise those figures and propose amendments at this Committee Stage because when you look at the people of Zimbabwe, most of them are living in abject poverty and if you continue punishing them by taxing them when in fact they are only taking just over 20 000 which is the figure reflected by the 250 000 per annum, it does not make any sense at all. I implore the Minister to take this into account and adjust the figures accordingly. Those would be my submissions Hon. Chair Sir. Thank you.
(v)HON. MUSHORIWA: Thank you Mr. Chairman. My contribution is that the auction rate during the time when we passed the budget for 2022 was around 1: 85 and it is now 1: 480 and accordingly, any adjustment in terms of tax free threshold should also take note of those changes to the extent that there is need in our view to make sure that the amount of money should have been moved by about five times from $300 000 per annum to something probably around $1.5 million rather than the current situation where the Minister just raises it from $300 000 to $600 000.
I think Mr. Chairman the Minister is aware that we need to come up with pro poor budgets, budgets that could actually then support the country – [HON MEMBERS: Inaudible interjections.]-
THE TEMPORARY CHAIRPERSON (HON. MUTOMBA): Hon. Members can we please have less noise in the House.
(v)HON. MUSHORIWA: Mr. Chairman, the Minister cannot run around and hide under the pretext that if we do not change the tax threshold that can actually affect his revenue projection. The truth of the matter is that if he raises the minimum threshold to probably 1.5 million, it will result in higher disposable income which in the process will increase the VAT inflows. So in a way it will cancel each other. So in that regard Mr. Chairman, I believe it is imperative for the Minister to actually adjust the figures accordingly.
HON. BITI: Thank you Hon. Chair. I want to add my voice to the debate on Clause 2 of the Bill. This is the one that seeks to increase the tax threshold to $600 000. Six hundred thousand at the official exchange rate is US$50, so it is meaningless, it is pointless. The minimum tax threshold must be measured with the poverty datum line and if the poverty datum salary is USD$282 then the minimum threshold must be as close to that. So we propose Hon. Chairman that the threshold, if it is to make a difference to our people must be at least $1.2 million.
The Minister in his response yesterday said that it will cause inflation. It will not cause inflation and how does it cause inflation? Inflation is not generated by salaries. Salaries do not have an impact on inflation. The point I made yesterday, the low minimum tax threshold is for poorly paid working people and working people have got a marginal propensity to consume, which is high. The person who stays in Dotito, Chiyendambuya, Nkayi, Tsholotsho and Dzivaresekwa, if he gets Z$80 000, all of that will go to expenditure, grocery and it will go to school fees. We do not have the savings in our banks and the money is immediately consumed and so it cannot be a drive of inflation. We know what is driving inflation and as he knows, are the trillions of dollars that are paid in cartels that are constructing roads and cartels that are coming from the auction floor. The working people should have better wages and so he must do the decent thing by paying and giving workers a decent opportunity by increasing the tax free threshold to Z$1.2m. After all, he will get the money back and the money will come back to him through the VAT system. So if we are going to be meaningful, he must do the right thing and increase the tax free threshold to Z$1.2m. I thank you very much.
HON. MPARIWA: Thank you Hon. Chair. Just to buttress the point that was raised by my colleagues, Hon. Mushoriwa and Hon. Biti, this budget is meant to be centred on poor people. I would want to agree that by the time we are going to go back on this particular Bill, it will have been eroded by inflation and I humbly submit that it be increased to Z$1.5 million so that it is meaningful in terms of the purchasing power. The workers are suffering and everyone else. In my debate, I alluded to the fact that workers are earning very little money and I submit that the Hon. Minister uses this figure of Z$1.5 million because it is a meaningful figure in terms of the purchasing power. Thank you.
HON. T. MOYO: Hon. Chair, it is my humble submission that I need to commend the Hon. Minister for increasing the tax free threshold from between Z$300 000 and Z$600 000. A mere calculation of Z$600 000 could give us about Z$50 000 a month because these figures are annual figures. Z$300 000 and Z$600 000 per annum. However, I also feel that the Hon. Minister may also reconsider by looking at the figures once more – Z$50 000 is also too little according to my perception but a figure around Z$100 000 per month will be fine for our members, especially the civil servants. Thank you.
(v)HON. MARKHAM: Thank you Chairman. I just want to add that the Minister is saying anyone who earns more than Z$50 000 per month is no longer poor and they can be taxed. The Poverty Datum Line is way above that. In simple terms, he has to review it upwards. Thank you.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Thank you very much. I thank the Hon. Members for their contributions. We are basically looking at both Clause 2 and 3. One is in words and the other is in numbers. I have listened to Hon. Members as they debated and today, I propose that I move the tax free threshold from Z$600 000 to Z$800 000. I thank you.
HON. GONESE: Thank you very much Hon. Chairman. I want to thank the Hon. Minister for the concession but I still believe that that increase is still very little because the basic principle is to put more money in the pockets of the poor like the people in Sakubva, Mbare, Makokoba and the people in Mutapa who are earning very little in terms of salaries but who are on actual salary remuneration. If you look at the proposal which was made by Hon. Members, we are looking at Z$1.2 million and the Hon. Minister is proposing Z$800 000.
I still think that Z$1.2 million was the best figure but in the event that the Hon. Minister feels that he cannot go up to that particular figure, I will still submit that the minimum should be Z$1 million and not anything less than a million. Otherwise I still think that when we are looking at the real figures which we are operating with in this country, we are looking at Z$100 000, that is now very little and when you look at it in the context of what the Hon. Deputy Minister of Finance said in the Senate last week, even the Permanent Secretary in the Ministry, they are all very clear that the main reason why we were having these pressures on the exchange rate was because of the money supply which they have limited and people have still been receiving their salaries but they have been no impact because they stopped giving those trillions of dollars to the service providers.
So at the end of the day, I believe that there will be very little impact on the fiscus if it is increased to Z$1 million and that is what I would submit although I would have preferred the Z$1.2 million but I think as a compromise, let us try to meet half way. Hon. Members have proposed Z$1.2 million, they are prepared to come up to Z$800 000 and I propose that let us meet in between at Z$1 million per annum. That is my submission Hon. Chair.
+HON. L. SIBANDA: Thank you Mr. Speaker Sir. I am here to say that Z$800 000 is a very small figure. May that figure be moved to Z$1 000 000 or Z$1 100 000. I thank you.
*HON. HWENDE: My appeal to the Minister is that if you look at Z$5 000 000 at the prevailing rates, that person is earning less than US$500. If you are going to tax someone earning less than US$500 at 40%, what it means is that for someone who earns US$462, you will take away US$180 from that person. We need to really look at that because the RTGS currency is not working. Most goods and services are sold in US dollars and someone has to change their money on the black market in order for them to be able to buy.
HON. T. MLISWA: We need to factor in the time when the Bill will sail through. During that time, there is inflation and I think because of that, it is only right to put it at Z$1 200 000 because no one has factored in the time. A lot has changed and if you factor in the time, I am sure Z$1 200 000 is quite reasonable, considering inflation.
HON. T. MOYO: I think these figures are applying for the period 1 August 2022 right up to 31 December 2022. There is going to be another negotiation in November when we are going to have another Finance Bill coming in November. I need to applaud the Minister for raising it to Z$800 000 so that we renegotiate in November. I need to support the Minister for raising the figures because they are only applicable for four months only.
HON. T. MLISWA: On a point of order. Hon. Moyo had come in quite well there. From Z$1 200 000 to $800 000, if we have to do the mathematics and factor in inflation, it means nothing. By the time the Bill sails through, maybe we need to really look at the inflation rate and consider inflation on everything. That is how we should be dealing with it at the end of the day. $800 000 is nothing compared to time. Z$1 200 000 is fair when you factor in the percentage of inflation. If I have to ask anyone right now, what is the percentage of inflation; that is quite critical?
We do not have the aspect of percentage of inflation, we are just thinking aloud here without coming up with a proper figure which is quite dangerous when we debate without proper percentages. $1 200 000 is good and it deals with quite a lot.
HON. MUSHORIWA: We need to put this into proper context. When you say Z$800 000 you need to understand that we are talking of Z$66 000 per month which is too little an amount. I am going to ask the Minister to consider two issues. First and foremost, when we say push it at least to $1 200 000, it will equate to about $100 000 per month which is exempted from tax. It could probably go a long way. When you look at the cost of the very basic things like mealie-meal, sugar and cooking oil, you realise that within that Z$100 000, it would be still too little.
There is another issue which the Hon. Minister needs to take cognisance of. When we passed the Finance Bill of 2022 last year in December, the US dollar component which is exempt from tax is actually higher than the Z$66 000. The Hon. Minister can actually check, the current set up in terms of the US dollar if you multiply that US dollar using the auction rate at the moment, it will tally to Z$1 200 000. To that extent and for the sake of uniformity, let the rate both to the US dollar terms and RTGS term apply. If we do that, we will come to about Z$1 200 000 per annum.
HON. BITI: We are making a strong point to the esteemed Minister of Finance that Z$800 000 only takes the tax free threshold marginally to about Z$52 000 which, with respect, is meaningless given the levels of official inflation which is close to 300%. If we take Hon. Moyo’s proposal that we get to Z$100 000, it will give us Z$1 200 000 per year. It gives the working people some fighting chance because of this threshold. We acknowledge the Minister’s concession in moving from Z$600 000 to Z$800 000. With respect, it is not good enough.
Again with respect to Hon. Moyo, inflation is real - so we cannot postpone the debate to November because we cannot freeze inflation. If there was a possibility of freezing inflation, then we could buy his argument. Mr. Speaker Sir, can I move to the tables at paragraph 3. I was not aware until the Minister said that we are also debating paragraph 3. Those tables in paragraph 3
THE TEMPORARY CHAIRPERSON: Order Hon Biti, let us do one at a time.
HON. BITI. Minister, I appeal to you my good friend that let us put the tax-free threshold to Z$1 200 000 which will come to an income that is tax-free of at least Z$100 000 per month. I know you do not stay in Highfield. If you stayed in Highfield, Dotito, Tsholotsho or Chiendambuya - you would understand the political economy of our working people. We are suffering Hon. Chairperson; we are surviving on tsaona which is four leaves of vegetables, a little chivharo chemafuta and a little plate of upfu. So we appeal to the Minister to do the right thing and increase the tax threshold to $1, 2 million which will come to 100 000 per month. I thank you.
*HON. CHINOTIMBA: Hon. Chair, I would like to add to the debate with regards to the tax free threshold. As I speak, I represent workers. The suffering that the workers are going through right now has never been experienced. I am speaking as a representative of workers not political parties; we cannot go anywhere with 66 000 RTGS. Our workers are suffering; the companies are being forced to close.
The Minister does not know what is happening in the industries, so as we debate, we want him to understand. If only the tax free threshold can go up to $100 000 because as we speak, the salaries that the workers are earning are very deplorable.
When we used to represent workers, we used to call for minimum wages but now the Ministry has realised that if we talk of minimum wage, there will be serious conflict between the employer and the employees. So they opened up to negotiations and as we speak, there is nothing good for employees. Anything that you can buy in a shop is pegged in USD using the parallel market rate. There is no shop that you go into which uses the official rate.
If you realise that it is pegged at the official rate, it means that the price will be very high in USD terms because that way they get to the price they want. Honestly speaking, I am sure most of us, if not most of us are employers, some of us have domestic workers. Some of us are even ashamed of paying their domestic workers because their wages are not sufficient. So I kindly ask with God’s grace that if there is no money, there is nothing much we can do, we may try to barter each other here but we need to move the tax free threshold to $100 000. That is my kind request to the Hon. Minister. As a leader and a representative of workers, I know the workers are very happy when they see us. So as we speak, I am going tell them that we spoke to the Minister. We kindly ask the Minister to listen to us, let us not consider our background parties, whether it is ZANU PF or MDC but let us speak as representatives of workers. I thank you.
HON. RAIDZA: Thank you very much Hon. Chair. I just want to support what other Hon. Members have already said that the tax free threshold needs to be increased Hon. Minister to $1,2m for few reasons. As you know that by giving more money to our employees, it is also another opportunity for you to put smiles on their faces.
Our employees have been going through difficult times because of what has been obtaining in our economy but I think if you will get what we are submitting here as Hon. Members, I think our employees outside there will be having something to smile over.
Maybe the economic fundamentals may not be allowing but we are imploring you to say let us look at both sides, it might be very difficult but we know from your back pocket, if you give our employees this tax benefit it will make them to smile in a way. By so doing, they will not be so much agitating for salary increase. If we raise or lower the taxes like the way it is now, the challenge is that the disposable income will remain very small. We will always be asking for huge salaries, so I think another way of us dealing with this issue of demanding more salaries is by working around our taxation on the Pay As You Earn so that at least our employees can remain with the same salaries that they are on but at least as the Central Government, we give them more disposal income. In a way they will appreciate such efforts from you our Hon. Minister of Finance.
HON. NDUNA: The issue of tax free thresholds is noble and if it pleases you Hon. Minister, I ask you to get further proposals as to how you can ameliorate the current challenges that the civil servants in particular are facing.
There is what is called non-monetary benefits and I will show you how that has benefited those in the rural side. Those in the rural side have benefited from non-benefits through the issuance of land but fast forward, that land you cannot give it to civil servants, pensioners and urbanites. I would give you a reason why and I will want you to unlock that system that you can use the non-monetary benefits to up the morale of the civil servants, pensioners, artisanal miners and all the urbanites. All the people in the urban areas are angry. The civil servants are angry. The money you are giving them is just a pittance, compared to the cost of living. So it is my thinking that if you look just at the mere salaries, it is going to help you immensely.
The A1 is called a 10 hectare, in the rural area a man who owns 10 hectares has been given that for free….
THE TEMPORARY SPEAKER: Hon. Nduna, the debate is on Clause 2, amendment of Section 14, which is actually dealing with tax free threshold, not only on civil servants but for the generality of workers. - [HON. NDUNA: I am coming there, it is non-monetary benefits to complement…] - No, Hon. Nduna. [HON. NDUNA: Hamudi futi. Ko magarirei padhuze naChair muchivataurira futi zvisiri izvo. Hon. Chair, I am coming to how he can ameliorate. This is non-monetary benefits to augment and complement.] – Hon. Nduna, here we are not debating salaries. We are talking about the tax free threshold. – [HON. NDUNA: Yes, you see Hon. Chair, you will get to where I am coming from. It is going to help the Minister. This is clause by clause, why do you not listen? It is the only time Hon. Chair, where I am allowed to debate more than two times on the same matter] –
Hon. Nduna was asked to approach the Chair.
HON. NDUNA: Thank you. Besides the tax free threshold of $1.2m which is noble, just and right, I even ask you Hon. Minister to up the game and raise the morale of the urbanites in particular, who are mostly civil servants, pensioners, artisanal miners and all other citizens, including war veterans, war collaborators, restrictees and detainees. How can you do it? You can align, in my view Section 205: 1A of the Urban Councils Act and Section 152 (1) (c) of the same Act, with Section 72 (7) (c) of the Constitution in order for that to empower you to give non-monetary benefits in order to complement the tax free threshold. This is my submission and it is thinking outside the box to get what we can and can what we get, to use what we have to get what we want. This is what the people of Chegutu West Constituency would submit. Thank you.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Thank you Hon. Chair. I would like to thank Hon. Mushoriwa, Hon. Biti, Hon. Mpariwa, Hon. Moyo, Hon. Markham, Hon. Hwende, Hon. Mliswa, Hon. Chinotimba and Hon. Nduna. I thank them for their contributions to this debate. Let me respond perhaps in three parts.
First of all, the Supplementary Budget of $851 billion that was appropriated by this Parliament and will be applied to various NDS1 for the activities is based on the threshold that I have proposed. If it was based on the threshold of moving from Z$300 000 to Z$ 600 000, I would have made an adjustment to say let us move on to Z$ 800 000, but already we would erode that Supplementary Budget.
Secondly, if we consider that month on month inflation over the next five months and this is our projection, it will be just below 10%. We think it will be about 8% initially and then taper down due to the measures that we put in place. In particular, you see price drops in the shops. This is already beginning to happen. Prices are coming down, so we expect that this inflation figure would not be higher than 10% on a month on month inflation. Given that, I really feel that an increase from Z$ 600 000 to Z$ 800 000 in terms of the threshold is appropriate. If we go higher than that, we are going to erode the tax base.
However, I listened to the Members and I will reach a compromise. So, I am going to request that we move it from the Z$ 800 000 that I have proposed to Z$ 900 000. I thank you. - [HON. MEMBERS: Hear, hear.] –
*HON. HWENDE: Mr. Chairman, I would like to applaud the Minister for compromising and reviewing upwards from Z$ 600 000 to Z$ 900 000 tax free threshold. I am sure since yesterday he heard the requests and appeals from Hon. Members here. He heard how the salaries are affecting people out there. People are suffering and they are not even able to meet their basic requirements. That is why you hear Hon. Members standing up here for the review of the tax free threshold.
My appeal going forward is, if only all of us are dependent on salaries for survival - Hon. Members, Ministers and the Executive, this debate would not be so difficult. As we speak, this bench is empty here because the Hon. Ministers are travelling outside the country and get per diems. Some are attending useless conferences only to collect allowances. So we are not taking the issues of salaries seriously. We also want to hear from you on how the salaries and allowances you are giving to Hon. Members are pegged at. Thank you Hon. Chair.
HON. GONESE: Hon. Chair, I just wanted to mention one other dimension which the Hon. Minister may not have taken into account. I really want to thank the Minister for the further concession that he has made, however I want to point out almost in line with sentiments raised by Hon. Hwende but from a slightly different angle. We have got for example civil servants who get the cushioning allowance in United States dollars. However, we have got some workers in the private sector. A lot of employers are taking advantage of the fact that we are using the Zimbabwean dollar in conjunction with the United States dollar and some of these workers are actually getting only the RTGS without any other hard currency components.
There are also some other benefits, for example, because of the dire situation for civil servants, arrangements have been made for transportation, but you find that some workers just get the basic salary and nothing else. No other incentives and no other allowances. I think as from yesterday, ZUPCO has increased its fairs. While the Hon. Minister has mentioned that some prices may be stabilising as a result of the relative, and I use the word relative advisedly, relative stability in terms of the exchange rate, but the fact still remains that there are some workers who still have got to use that basic salary in terms of the bus fair and ZUPCO has increased its fares from $220 to $400 in respect of the first 20 kilometers and also for above 30 kilometers to over $500. In real terms, a lot of the transport operators actually want United States dollars, US$1 when you are coming from Mufakose, Ruwa and so on. So you find that worker who does not have any other benefit is going to suffer and that is the reason why, whilst I thank the Hon. Minister for increasing to 900 000, I would still implore the Hon. Minister to go that extra step and go to the ZWL100 000 which would be $1.2million per annum.
Other Hon. Members like Hon. Mpariwa had mentioned $1.5 million per annum and whilst I thank the Hon. Minister and I understand where he is coming from, the Hon. Minister should put himself in the shoes of the people who I am talking about who do not have any other allowance - no transport allowance, who just get a basic salary, who do not have a cushioning component in United States dollars in hard currency and so on. If the Hon. Minister considers their plight, he might be moved to adjust it further to ZWL100 000 which we have been asking for - if the Hon. Minister could really seriously consider that issue. I thank you.
*HON. CHINOTIMBA: Thank you Chairman. The budget that we are debating right now is only meant for three to four months and then we go for the annual budget for 2023. So if you see the Minister moving it three times, it means we are also affecting him, so he moved to ZWL900 000.
I would like to applaud him because at least he has listened to us. He is not like a Minister who ignores just like what other Hon. Members referred to. So I would like to say when we get to the annual budget, the tax free threshold should be at ZWL1.8 or ZWL1.9m. So right now, I think we are going to wait to find out what it is going to be like. I would like to thank the Hon. Member, the secretary general for CCC who said that is enough. So I would like to support him that yes, it is enough. Let us keep it there. I thank you.
HON. CHIBAYA: Thank you Hon. Speaker. I want also to join other Hon. Members and also to thank the Hon. Minster for increasing the tax free threshold to ZWL900 000. Thank you very much for that Hon. Minister. However, I would like to say that in future, we need to consider the poverty datum line. Right now for a family of six, we are talking of ZWL326 000 per month and if we multiply that by 12 that is ZWL3 900 000. So in future Hon. Minister, when we talk of a tax free threshold, you need to consider the poverty datum line. I thank you.
HON. T. MLISWA: Hon. Chairman, I had alluded to the point that people had not put figures and let me probably educate them and stand by my decision. The threshold was Z$300 000 per year. The current inflation is at 258%. That is why I am saying they were talking without figures and we want to talk about figures, 258%. Which means 258%, 100% is Z$600. Another 100% is Z$900 so I am pushing to Z$1 million in terms of the current inflation because people were talking without these figures and I like to be statistical. So you were just talking. I asked you inflation is real so inflation is 258%. I then propose that if you move it to Z$1 million, at least we would have dealt with the inflationary situation. Remember that before this move, they were suffering already and in fact, what we must be doing moving forward is to factor in inflation for the next three months up to November, but I do not want to go into that Chairman because I can even move that we move to Z$1 million now but again, inflation in the next three months will be so much then we factor in the percentage.
I have decided to hold my guns because I can also sit down and come up with a figure which will then mean that disposable income is disposable income. Let us not sit here and talk about disposable income which is not disposable income because you are tired of debating because you moved your budget, you won and then you forget the ordinary person. We do not work like that. This House must be fair in representing everybody. Your budget here was Z$4 billion, it moved to Z$15 billion. So let us be very careful with what people say about us. We must represent people’s interests not because tadya tokanganwa vanhu. Ours moved from Z$4 billion to Z$15 billion. Let it move from Z$300 000 to Z$1 million then we are fair, and then we are true representatives of the people. Thank you.
+HON. MAHLANGU: Thank you Mr. Chairman. Why would the Minister not give ZWL$1.2 million? I am saying that because they have their own expenses and needs. Still ZWL$ is not enough but if we look as from the 1st of the month up to the 30th, family budget is not enough to take that person halfway. Let us increase so that the electorate will know that we represent them in truth. Their situation is just terrible and things are tough. Schools are just about to open. I am looking at a pensioner, a widow, an orphan and putting them there and let us look at their pension. Their pension is small and it cannot take them through the month. May the Minister increase to ZWL$1.2 million. I thank you.
*HON. R. R. NYATHI: Hon. Chair, I listened to the Hon. Members debating and I remained with one question. When we are talking about increasing this money, where is it coming from because what leads to the increment is the functioning of industries as well as taxes that are coming in? So I think what was earlier on alluded to that we are only remaining with three months to get to another budget in November so that we see whether the inflation is going down and so that by the time we come back in November, we can be able to come up with a figure...
HON. T. MLISWA: The Hon. Member of Shurugwi North, Hon. Nyathi is out of order, especially to ask where the money is coming from. If you followed the debate yesterday, we were talking about taxing mines and so forth. That is the job of the Minister of Finance to take tax from those who have money like the Chinese who have minerals. So if you say where is the money coming from when we debated and we said go and take money from those who have the money and so forth, we do not know whether you were here yesterday.
No wonder we proffered a solution that money will come from taxing rich companies and from ensuring that there is corporate social responsibility and we said everything. The money will come from our minerals and Chinese who are at Manhize were given that land for free and we should go and take 50% from that and that money goes to Government and it also goes to the Sovereign Wealth Fund. We should go there and take the money from our minerals. It has nothing to do with you but the Minister will do so by taxing those with money. We will go into the mining sector and that money in the mining sector will help agriculture again until we are happy. The resources must fund us. Thank you.
*HON. R. R. NYATHI: I would like to applaud what Hon. Mliswa is saying. He has a good point but my point is, we cannot get rich overnight. There are processes and we cannot go to Manhize to get that money...
THE TEMPORARY CHAIRPERSON: Hon. Nyathi, it is not the salary, this is a relief to the workers on the money that is already being paid in as salary. So it is the tax free threshold, a relief to the workers not salary. There is no money going out. It is not a matter of the Minister going out to look for the money. If you are getting a salary of USD1000 or ZW$1000, the taxable amount and that is the money that is being talked about so that it goes up. It is not the salary increase.
*HON. R. R. NYATHI: I agree with you Hon. Chairman that we are talking of tax free threshold. So my point is where we can get that money because we cannot get it overnight. It follows a process. I thank you.
HON. PROF. M. NCUBE: Thank you Chairman. I thank the Hon. Members for their passionate plea for me to consider increasing the threshold. I have done that but we will lose revenue Mr. Chairman. It is not clear where the revenue will come from. It is certain that in November we will consider an adjustment that will click in on the 1st January, 2023. This has been arrived at scientifically. I am encouraged by Hon. Mliswa’s use of figures where basically he is saying inflation is at 250%.
Therefore, he expects a threshold increase beyond ZWL$900 000 or a million but our expectation that inflation year on year is actually coming down as led by the month-on month-inflation which is already coming down. So that is what you will discover in the next couple of months that that inflation is coming down. I have worked it out as I explained earlier that if we target about 10% month-on month-inflation, on average going forward into December for the next five months, that will take us to 50% increase and that is the increase I did when I moved from ZWL$600 000 to ZWL$900 00. That is how I got the ZWL$900 000. So I think let us leave it at ZWL$900 000 for now and come November, we will reconsider and that is what I persuade Members of Parliament to do. I thank you.
HON. T. MLISWA: I am glad that the Minister listened to the inflation matrics where he had calculated the monthly inflation coming down. You would appreciate again Chair that if there is a law, it cannot work in anticipation. The existing law is what is working. From a question of fact, I would like to differ with you that I agree and it is very good for us and the people because they have lost a lot in terms of inflation. Inflation is coming down and it certainly gives them that hope and they are able to recover where they must recover. You do not really lose nothing and that is the reason why I am appealing to you; ZWL1 000 000 would certainly be something. You have moved twice and the third move is the last move. The Z$1 000 000 would be the third move and it is the last move. The game is over. I am now appealing to you to make that third move and it is the final move but I am happy with what you have said and waiting for the good news that you have said. I have no doubt that it will come through. That will be my appeal to you for the people. That third move!
HON. PROF. M. NCUBE: I am sympathetic to the plight of our hard working employees in the civil service and also private sector. I understand where the Hon. Member is coming from. I want to say that we always work on projections even if it is the budget that we pass at the beginning of the year, it is always a projection. Projections are normal. That is how we work. It is not surprising that I am working on projected month-on-month inflation to come down in the next few months towards the year end.
Beyond this point, we are going to lose revenue. We will fail to meet our target in terms of Supplementary Budget and I do not think we will look good frankly when that happens. We will fail to fund programmes. Members of Parliament pushed me very hard to increase the Parliament budget to ZWL15 billion. I was actually convinced that this money would be put to good use and therefore I must support them. If we are now eroding the very tax base that we seek to protect, how are we going to support the ZWL15 billion to support their work in the constituencies? Let us end at ZWL 900 000 for now and we will get to November, again we will work together closely to increase the threshold.
HON. T. MLISWA: Minister, the third move, let us meet halfway ZWL 950 000 and that is it. It is done.
The Minister of Finance and Economic Development having consulted with Hon. T. Mliswa
HON. PROF. M. NCUBE: I have consulted with the Hon. Member and we have agreed that we end at ZWL 900 000 for now.
Amendment to Clause 2 put and agreed to.
Clause 2, as amended, put and agreed to.
On Clause 3:
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): I move the amendment standing in my name that:
Amendment to Schedule to Chapter I of Cap 23:04
The Schedule (Credits and Rates of Income Tax) to Chapter 1 of the Finance Act [Chapter 23:04] is amended with effect from 1 August in the year of assessment beginning on 1 January 2022, in Part II by the deletion of the items relating to the level of taxable income earned in Zimbabwe dollars from employment and the substitution of the following
LEVEL OF TAXABLE INCOME
14 (2) (a) (i)
Up to $250 000
14 (2) (a) (ii)
$250 000 to $600 000
14 (2) (a)( iii)
$600 001 to $1 200 000
14 (2) (a) (iv)
$1200 001 to $2 400 000
14 (2) (a) (v)
$2 400 001 to $5 000 000
14 (2) (a) (vi)
$5 000 001 and more
HON. MUSHORIWA: Given the concession by the Hon. Minster on Clause 2, it therefore follows that the schedule needs to be revised so that it factors in the ZWL 900 000 that he has agreed to. The major challenges relate to the other figures and I wanted to find out from the Hon Minister before we debate further, that after you have factored the ZWL 900 000, how does your schedule now look like so that we will be in a position to come in and see whether the figures that you have come up with will make sense at the end of the day?
HON. BITI: This is a very serious provision and it ranks at par with the provision which we were debating a few minutes ago, Clause 2. This is now the tax band and I need to submit that tax bands that are here are not realistic in our economy. They are rising out of, and causing the massive over taxation of our people. I hope the Minister can adjust dramatically and fundamentally. If you look at the figures, for any person earning ZWL 5 000 000, the taxation is 40% but if you convert ZWL 5 000 000 into US dollars by using whatever rate, and you reduce that to a monthly salary – ZWL 5 000 000 will give a salary of US$462.
The Hon. Minister is suggesting that a person who earns US$462 in Zimbabwe must be taxed 40%. In other countries, this is the minimum tax threshold. My brother the Minister has worked for international organisations. He was the vice president of the African Development Bank. He has worked in Switzerland; he knows that 462 USD is nothing - that is what teachers used to get. Teachers used to earn 500 USD. So, he is suggesting that the teacher earning 500 USD must be taxed 40%.
The 40% tax rate is for billionaires in USD terms. If you tax the next figure of ZWL2, 4 million to ZWL 5 million, that is USD224 per month. If you tax a major figure of ZWL1, 2 million to ZWL2,4, that is equivalent to USD111 per month. How do you tax someone USD111 per month, 30%, he is earning peanuts and then you take 30% of his peanuts?
A person who is earning in the bracket of ZWL1, 2 million is USD55, a person of ZWL250 000 to ZWL600 000 is earning USD22 in real terms and I have used USD because that is the real salary because we are operating in a dollarised environment. The Minister has said the regime of multiple currencies will operate until 2025.
So, I suggest Hon. Chair that the Minister allows his officials who are sitting at the back there to re-work their figures in line with the ZWL900 000 threshold. We park Clause 3 at the end of the debate so that the adjustments are made in light of the ZWL900 000 adjustment, in light of the fact that these figures as they stand are unrealistic. How do you tax someone who earns USD 462, 40%? Is he a Bill Gates? Is he a Kuda Tagwirei or is he a Simon Rudland? It is not right.
So, I submit that we postpone it to the end then the list of people who are there at the back, the Principle Director of Taxation and the esteemed Minister of Finance Prof. M. Ncube and my brother Hon. Chiduwa revisit and re-work the figures, we park it to the end. I thank you.
Clause 3 defferred.
On Clause 4:
HON. MUSHORIWA: Hon. Minister, the proposal of charging 5 cents for each withdrawal of USD1000 is not right. I just want to put it into context in this way; 5 cents per USD1000 equates to 0, 5%. So we are saying that we are charging 0, 5% for every withdrawal which is less than USD 1000.
In addition Hon. Minister you are also aware; I have just done the calculations in terms of the money that the bank charges and other service fees, it will mean that for a person to withdraw money below USD 1000 from the ATM, a person will end up getting charged 1,5% of the amount.
Then there is something that I also do not understand on C, you are charging 0, 5% on withdrawals of less than USD 1000 then you then jump from 0, 5% and you start to charge 2% on those that are withdrawing more than a USD 1000 dollars from the ATM. I think that movement does not make sense to me because one would think that if they are going to move from 0, 5%, surely you should move to maybe 1% rather than to jump from 0, 5% to 2%, it does not read well.
Therefore, Hon. Chair, I would request the Hon. Minister to re-look into this and adjust these figures.
HON. GONESE: I just want to associate myself with the remarks made by our Hon. Mushoriwa. I was also looking at the figures and before debating the actual specific figures, I just want to mention that Zimbabweans are generally heavily taxed and you are penalised for everything when you want to do RTGS transfer.
In respect of what you are talking about, the withdrawals, I believe that 2% is on the high side. If we are dealing with the principle that the figure is starting at 0, 5%, I submit that the maximum should just be the 1% so that in terms of the provision in C, the figure of 2% there is replaced by 1%.
I believe that a lot of the people in this country are going to benefit from that reduction because you find that everywhere, the point made in respect of our Clause 3, we will still come to it and debate but I believe that at each and every stage, we must have these downwards adjustments in order to put more money into the pockets of the citizens of Zimbabwe who have already been suffering for quite a long time. I thank you.
HON. BITI: Hon. Chair, I associate myself with the remarks by Hon. Mushoriwa and Hon. Innocent Gonese of Mutare Central that we need to revisit these amounts. Let us lower them Hon. Minister.
The problem and that is why I said to you a few minutes ago that I wish you lived in Tsholotsho because you would then understand the political economy of the average Zimbabwean. You wake up and you are taxed every second and if you run an account, there is no point in running an account because you are taxed. So, please, make the life of Zimbabweans easier by ameliorating their conditions, by mitigating their conditions, by removing some of these unnecessary taxes.
However, I want to speak as a professional Hon. Chair, I am a lawyer, I run a trust account. Your clients put their monies in a trust account. I had one situation where I was acting for a children’s trust. So, we put their money in USD trust account in one of the country’s biggest bank. When we took the money now, it was hit by the 2% and because it was a lot of money, the net effect of the withdrawal was USD1200. How then do you say to a children’s trust that you have lost USD1200 to Hon. Prof. Ncube who stays in Umwinsidale – it does not make sense.
So, at least exempt trust accounts and burial societies but the bottom line is that the 2% on USD is such a punitive amount and it is double taxation because the amount that have been deposited has been earned. Hon. Chair, I hope the Minister is listening to me. On my business account and I am speaking from my own experience as a lawyer; my Zimbabwean dollar account because of these taxes, I had to pay my own personal money because I could not say to clients your money has been deducted. I paid RTGs$200 000 of my own money but what does it do now - it discourages savings and banking.
Mr. Speaker, we are the only country in the world where if you deposit money it reduces. The bank has to phone and tell you that you are now in negative balance. There are no interest rates. John Panonetsa has increased rates on lending to 200% but there are no interest rates on savings. The truth of the matter is that there is no country in the world that will develop without a banking sector and savings. China right now is the second largest economy in the world because of savings that are 50% of GDP.
My learned friend Hon. Chiduwa is an economist. He should be able to know that a developing country like Zimbabwe needs at least savings which are 25% of GDP. We have nothing, zero. When I grew up, there used to be PUPS which is Paid up Permanent Shares. Somewhere in this Bill we are going to give tax free status to POSB because POSB was there to save money. I opened a bank account when I was in Form Three at Goromonzi which had money until things started deteriorating in 2004/5.
Mr. Speaker, the 2% and 1% is excessive, and all this is doing is to encourage a culture of dis-saving in Zimbabwe. Look at the result of banks. They are making super profits, all of them without exception; even banks that we know are so badly run, but I will not mention their names. All their profits are from non-interest income. The business of the bank is to make money from lending but they are not making money from money but from these charges. So bank managers are driving posh cars. Go to Sam Levy Village, they own three or four houses because they get free bank loans but they are not making money from their core business. They are making money from these parasitic activities. We have to press the reset button which starts with a relook at these extortive measures. I thank you very much and I hope the Minister is listening.
HON. NDUNA: If it pleases the Hon. Minister, it would be prudent for us to now put a cap or an end to the Transitional Stabilisation Programme which was supported by the 2%. It is my thinking that the running and the need for the 2% has come to an end. If as I have been guided by him, if that still exists, the 2%, it would not be right to introduce another one. It is my thinking that 2% or the 1 or 1,5% that needs to be introduced should come to a screeching halt. It is my thinking in that Hon. Minister, I come from a place where the artisanal miners, I am trying by all means to get them to be banked.
To that end, I have saved CBZ bank of Chegutu from closure because I have promised them that we will get more than 500 000 artisanal miners in my constituency to be banked even USD$100 per month. Having said that, the introduction of the 2% tax might be a dis-incentive for those that will want to be banked or those that want to be drawn into the banking sector. Accounts currently in the banks are being opened to be closed.
I have Mr. Nhando at CBZ bank in Chegutu who happens to be the manager. He calls my cooperatives and I have 10 of them that take care of youth funds in my constituency, for more than 10 000 youths. He calls the principals or signatories to those accounts to come and deposit more money because the initial deposits would have been eroded without any use or transfer to any other bank or activity, but principally due to taxation by the bank in terms of its functions. That cannot be forgiven and is unforgiveable. It is my thinking that the introduction of that tax will be both luxurious and will continue to haemorrhage the meagre funds we are currently getting, in particular the informal sector. The informal sector definitely cannot be incentivised by the introduction of these taxes.
Therefore, I make a clarion call for the Hon. Minister to see it in his heart that there will not be this introduction of this tax because it will further damage the relationship that I had created with the artisanal miners and who by the way are the largest contributors to the gold vault annually contributing more than 30 tonnes annually. We wanted as I stand here to get them to be banked with the excess funds that they have but with the introduction of this dis-incentive there might be USD flight. They will not be any trust relating to them getting their money to the bank until that relationship is harmonised Minister. If it pleases you, as it relates to this one especially adherence, bringing the money for the artisanal miners into the banking system, let your heart be on the right side. Thank you.
*HON. MPARIWA: Thank you Hon. Speaker. I would like to add a few points to this debate. If you look at what is happening right now, the people have stashed the little money that they have in their pillows in their homesteads because they are not sure what will happen in the future. My thinking is that the Minister should make it easier for people and give them assurance that if they put their money in the bank it will be safe as alluded to by Hon. Biti. People must have confidence that if they keep their money in the bank, it will not be eroded like what we have witnessed. So, all those informal traders and informal transporters will only take their money to the bank if it gains interest. People can only take their money to the bank if they are assured that it will gain interest instead of being eroded. So, like what the Minister dealt with when we were talking about the ZWL900 000, I am sure it will compromise or ensure that we put in place rules that ensure that the banking public get confident to use the bank. Our children in the diaspora should also feel confident to transact through the banks because this looks like a legal debt collection scheme. People will lose jobs in the banks because people will end up using their pillows to keep money. So, I am appealing to the Minister to rectify this so that people can confidently use the bank, including people in the rural areas like Chiendambuya.
(v)HON. P. D. SIBANDA: Thank you Hon. Chairman for the opportunity to air my views on this budget debate. I think my colleagues have done extremely well so far in articulating the position of Members of Parliament with regards to the budget. I will not take much time with my contribution save to say it is important for us all to understand that the economic model that Hon. Ncube and the Government use is of an imperialist and neocolonial nature. It seeks to make the poor poorer. It has to be an economy in which people are discouraged from saving because we all understand the impact of not having savings. What it means is that at the end of the day, as alluded to by Hon. Biti, the main business for banks is lending out money but where do they get that money to lend when people are not saving? They do not get that money and because of that, we are making the poor worker who is forced by the situation to remain poor because they are forced to receive their salaries through the banks. What that means is that basically we have the poorly salaried workers who are the only ones who are forced not only by law but also by the operations from their employer that they should get their salaries through the bank. I think it is important that we need to revise that and have a model that allows the poorer to also get some kind of advantage. Therefore, it is uncalled for to continuously tax indirectly those people that are putting their money in the banks. I totally agree that it needs to be revised. We need to come up with a model that promotes savings. That way, it will make it easier for the poor workers to also have an opportunity to enjoy their meager salaries without these punitive taxes that are being introduced by the Minister. So, it is my submission that the Hon. Minister needs to revise his model so that we have a model that promotes savings and at the same time ameliorates and mitigates the situation of our poor workers and our poor pensioners. The pensioners and the workers are the majority who are currently banking in this country and therefore, we cannot perpetuate their fall by putting up policies that continue to affect the value for their money. I thank you Hon. Chair.
*HON. CHINOTIMBA: Thank you Mr. Chairman for affording me the opportunity to add my voice to this debate with regards to the two percent. This is driving people away from banking their money. There is a lot of US dollars in homes and companies but because of this two percent, especially on the US dollars, it is difficult to get it in this country and it is in high demand. Every person is looking for US dollars. I concur with other Hon. Members that banks should not profiteer but should look for money through better ways and mobilise people to bank money. So how can they do that when they erode people’s savings? That means you cannot get it. I do not know what the issue is between Government and banks, whether the bank gets one percent and Government gets another one percent. If that is the case, it should come down regardless of the situation. They should share maybe one percent half-half. Banks should earn money properly not in an unscrupulous way. I concur with Hon. Members to do away with the two percent. Hon. Minister, I went with an artisanal miner to Agribank to open an account because he had been paid US$50 000 cash by Fidelity. He was instructed to go and get that money from the bank but they do not have bank accounts but just go into the bank to get their money. I asked him why he withdrew such large sums of money instead of keeping it in the bank and he said he fears the money will be eroded, might wake up and not be able to access it or it will be RTGs. He might have been lying but Hon. Minister, let us urge our banks to use money wisely and to give people interest for the deposited US dollars and not deduct from the account. As was alluded to earlier pertaining to POSB Savings Bank, I opened my POSB Savings Account in 1975 before I joined the liberation struggle. My money used to increase due to interests that were being added, but that was banned. Now nobody wants to keep their money in the bank because there is no more interest that used to work as an incentive. Every month, money would earn interest and now that has also ended, even the RTGS component. People are being forced to receive their salaries through the banks but if you see how it is used; banks are taking a lot of money through bank charges.
Even the tax free threshold that we were talking about here, the moment that money goes to the bank, and the tax that Government is talking about is better. We now have two ministries, that is, the Ministry of Finance and Economic Development and the bank ministries because banks are now operating as ministries as well. So where are we going? We are saying, what the banks are charging is too much. I propose that tax be scrapped all together, maybe that may not be possible but at least let it be at least just one percent (1%). I thank you.
(v)HON. MUDARIKWA: Thank you very much Mr. Speaker Sir for allowing me to contribute on these charges. Hon. Chair, when I put my money in the bank, the first thing that I expect is to get interest. The banks in Zimbabwe are a different story all together. We must never ever punish anyone who brings money to the bank. You must remember that the money has already been taxed; people have paid Pay As You Earn when they get that money. In the process of consumption, I still go and pay VAT on that money again. So there is this treble taxation that the Hon. Minister must see.
We must never play around by just charging taxes for foreign currency. Foreign currency is new money in the economy that has come in and more so, when the foreign currency comes in; it is also taxed by Government. There is this issue of 60-40 so we must have a conference and he strategises for new ways of developing our country. Our banks have let down this nation. If banks are not lending money to farmers, then there is no economic activity in the farming sector. If banks are not lending money to industry, then there is no economic activity in those industries. They are just making money out of bank charges. Bank charges must now be controlled; we have to control the bank charges because they charge what they want. They just wake up and start charging whatever they want. This issue of continuous charges left, right and center will destroy our industries.
The ultimate objective is you will see a situation where nobody keeps money in the bank. It is unfortunate that all these banks are there and these are international banks. What they do in Zimbabwe, they do not do in South Africa or in Zambia. Why is it that there is this club of banks that are there to destroy industry and the farming sector? The Hon. Minister must set regulations that bank so and so, 30% of your clientele must go to agriculture and so much must go towards reviving the industries. So we really need to revisit banking policies.
What we are doing also is against the Banking Act. The Banking Act allows people to bring in money for safe keeping; it does not allow people to bring in money for taxation. We are actually violating the Banking Act because I bring money for safe keeping and not for taxation. This is my humble submission. I thank you.
*HON. CHIKWINYA: Thank you very much Hon. Chairman. Financial issues are a bit technical but they affect us on daily basis. My humble request to you Hon. Chairman, with the leave of the House, so that we move on the same page. I order for us to move on the same wave length Hon. Chairman. I believe that most of the Hon. Members are on Virtual. We need to give appropriate feedback to our constituents especially on this clause.
I hereby humbly request you Hon. Chairman that since civil servants are earning USD175.00 allowance, can we possibly get the total taxation before we pass this clause? What is the total taxation? After passing this clause, how much will it be so that we simplify this issue? We may over simplify this issue so that it may look like it is a small amount of money like five cents but we all need to understand how much it is. May the Ministry’s staff workout what the actual figure is? If you want to withdraw USD175.00, how much remains so that we also understand the new implications and how much the money is before passing this clause? The problem is that we have been passing laws that we may not fully understand but let us try to be on the same wave length with our constituents so that we will not be asked, in the banks, how we passed such a law? So that it will be referred as being Prof. Mthuli Ncube and Hon. Biti’s law. We need to understand the tax implications and calculations before the end of the day so that we know how much we are talking about. I thank you.
*HON. C. MOYO: Hon. Chairman, I wish to add my voice on Clause 4, with particular focus on automated tax on withdrawals exceeding USD1000.00. Hon. Chair, the rate at which robberies are happening in Zimbabwe is very high. Why? Because the majority of people are no longer banking their money. Instead, they put their money under the base and the robbers would be targeting those people who have those monies. I wish the Hon. Minister could put his feet into the shoes of the ordinary person so that banking becomes business. These days if you put USD5 thousand or even USD10 thousand in a bank, there is no interest. So I think that has negatively affected the banking sector and people have lost confidence in trying to ensure that their money is banked with whatever bank that is of your choice. It is my request to the Hon. Minister that instead of deducting 2% for amounts exceeding $1 thousand, it my clarion call that the percentage may be reduced to 1% percent. Thank you.
HON. RAIDZA: Thank you very much Mr. Chairman for giving me this opportunity to add my line of thinking regarding this issue. Mr. Chairman, when I was sitting there hearing what other Hon. Members were debating, I had a lot of questions in my mind to say is our Minister not hearing that we need so many people to bank. At the same time again, I was asking myself a question to say, what motivated our Minister to come with such an amendment that might be interpreted otherwise by an ordinary person. I then interrogated further to say the first two subsections of that proposal talk about five cents if you are withdrawing a thousand and below both in RTGS and USD and all of a sudden, the moment you want to take a thousand bucks, it is 2% - 5 cents to 2%. As I was pondering about this Mr. Chairman, I realised that maybe the Minister needs to take advantage of the submissions from the Members to give us a bit of a clue of what exactly he is trying to cure with this provision.
My simple understanding is that the lesser the taxes, the lesser the bank charges, the more people they will have appetite to invest. In the process, the Government will benefit from capital gains or withholding taxes but in this case we are working otherwise. So I want the Minister to enlighten us on the rationale. What is happening? What is he trying to cure so that at least at the end of the day as we are making these submissions, we have a little bit of understanding of where he is coming from, otherwise we all want to put our money in the bank but the moment we have this kind of pieces of legislation, automatically it might be misinterpreted otherwise to mean like, the Minister does not like people to bank their money. In the process, people end up keeping money in their pillows and everywhere and robbers will end up pouncing on the people. My submission Chair is that the moment we look at that differentiation of five cents to 2%, I think we need clarity so that at the end of the day, what exactly do we want to do because we have the IMTT tax already. The moment you do transactions with the bank we are already deducted the 2% but here again there is another 2% that is needed if you withdraw cash. Saka totizira kupi? Toenda here kuma transfers, toenda here kunowithdrawer cash then tosangana ne 2%? I would love the Minister in his response to clarify that to us to say where are we coming from and where are we going with this particular clause so that the nation will come to know why we are doing this. In other jurisdictions, people are encouraged to use paper money as a way of avoiding a lot of bank charges and a lot of taxes but here I am failing to understand Chair, but I think the Minister out of his wisdom is going to give us a bit of clarification so that we get out of this clause and out of this House with a clear mind of what we are trying to do. Thank you.
*HON. NYABANI: Thank you Chair. I would want to say the step that the Minister is taking will move all the economy to informal sector. Who will bank money? That tax they are proposing is just too much. They are destroying the banking sector, except that you want to tax the civil servants who earn their salaries through banks. Otherwise the other people do not earn their money through banks. I am representing 32 thousand people at home and I should debate so that they do not accuse me of passing laws without their consent. My point of view as an uneducated person, I do not know how educated people see it, this step taken is even worse because there will not be banks anymore. If you go to Rushinga, there are no more banks because there are no more clients. Banks are now found in Bindura. Pensioners cannot even get their money because they can only get it in Bindura. This proposal chases away banks from Bindura to Harare. What I am saying is the truth and you will realise it later that you are only destroying the banking sector. Those people you want to tax 2%, how much are they are earning? They are already suffering and you want to add salt to injury. What I am saying is, if you were to do that, representing the people of Rushinga, I object to this. I thank you.
(v)HON. MARKHAM: Thank you Hon. Chair. Most of what I wanted to say has been said but I just want to buttress a couple of points. The first thing is, there is no way taxes from Clause 2 to Clause 6 can be considered as pro-poor. My biggest concern is that the rich or the companies will be over taxed. Our problem is that we no longer use the physical money in the country because what is happening is everyone is paying into bank accounts. Basically it is being covered but people are getting taxed unnecessarily. When they withdraw the money, whether transfer they get taxed. Even when doing VAT, they are taxed, so the issue is this – what I would like the Minister to do is to look at his proposals for a poor person and a rich person and look at the level of taxes. He will see what the problem is.
If he looks at the money being taxed, even on Parliamentarians, he will get surprised. I understand where the Minister is coming from? He is trying to get money from wherever he can. I know we have mobile platforms and banks with huge sums of deposits in local and forex who are not paying any interest. The issue is - how can a company like Ecocash pay no interest? It must be the one with the biggest amount of electronic money sitting in this country but there is no tax. They have the core of getting taxed.
Finally, I have a major problem when it comes to people like pensioners, civil servants, youth and women trying to withdraw cash, I think this is the major issue. When the youth and women, particularly when they are involved in doing business, they are not going to store their money in the bank. So the bottom line is, instead of trying to formalise the sector, what we are doing is informalising it. Everyone is kind of running away from banking. I thank you.
HON. R. R. NYATHI: Thank you Hon. Chair. I think that when people are banking, the idea behind it is that they must get interest. Secondly, I know that in order for a country to run effectively and efficiently and for a country to be able to grow industries, the banking sector must be flourishing. This means that if our banks have got excess money because of savings, it then means that people have got the propensity to go to the bank and withdraw money and borrow money at an interest. The borrowed money on interest is the money that the banker also gets a certain percentage of his banking savings.
Now, in terms of what we are discussing, it is actually discouraging a person to go and bank. In my own opinion, I was thinking that the Minister would come with a Bill which says, if somebody banks money or tries to bank money which is less than USD 175 - which generally I also want to appeal to the Minister, although it is not the right platform, a general hand earns USD175; the manager also you give him USD 175, a legislator, you give him USD 175, it is not motivating by nature because everyone is earning the same amount as if they are doing the same type of work.
Anyway, let me go back to our discussion in play. I am saying, I was thinking that the Minister would say if one banks USD 175, he should get an interest of say 0.5%. If you bank your money which is above USD 1 000.00, you will get an interest of 2%, calculated over the number of months you keep your money in the bank so that you are also incentivised to bank the money that is staying outside there. Everyone has got USD in his/her home. If you get all that money into the bank, because the bankers are now getting interest on their deposits, it means that our industries can now go and lend money at a soft loan, which is not expensive and the banks get a lot of interest. That interest, I also get my portion.
I am failing to understand, like what Hon. Raidza said that what is that that has motivated the Minister to say we need 2% if one withdraws money. May be we are debating but we do not understand exactly the motivating factor. So, may be if he makes it clear to us because to us when you bank money, you are saying let the industry, let the economy grow but as Zimbabwe, no one is keen to go and bank.
Hon. Nduna gave a very important point. You know Shurugwi had several banks and I am a marketer for my bank because I only have one bank in Shurugwi, which is ZB Bank. I make sure that all the makorokozas, all the farmers and everybody is banking at ZB Bank because we do not want that bank to close or to go to Gweru so that when one wants to do business transactions, he has to go to Gweru instead of Shurugwi. If then those people are discouraged from banking, it means those banks are closing and eventually we will remain without a banking sector in the country.
So, let us come up with incentives. Let us come up with ideas of how we can grow our banking sector; how we can motivate our people to bank money and how they can grow. Banking is a business, we must not do the business for them but they must create business so that in their creation of business, we are motivated to bank our money. So, I submit.
HON. MADZIMURE: Thank you Mr. Speaker. I just want to add a few points to the debate. What I want the Minister to consider answering is - how is it possible that all our banks, their bank charges are higher than the interest? This means the moment you deposit your money, you know that from that particular day, your money is losing value. Even if the rates are stable but this is what happens in Zimbabwe, you lose money. How is it possible that the bank charges are higher than the interest that one must earn? Under those circumstances, will it be possible for any right thinking person to go to a bank where he/she knows that the moment I deposit my money, I start losing it?
Secondly, even when you deposit your money and you want to withdraw it, again there are limits. Even RTGs, you can only withdraw, ZWL5 000 a week, but what is that you do with 5 000 RTGs? Imagine queuing almost the whole day to get 5 000 RTGs? In real terms if we are to compare it with the USD, it is $US5. This has been going on, for a very long time and Members have raised this over and over again. I would want the Minister to just answer - how does he feel, does he ever go and withdraw ZWL5 000 himself? I think sometimes, Mr. Speaker, we expect miracles. We expect people to do business with banks when it is virtually impossible because there is no way you can do business. There is no way we can maintain the banks. I wonder how it is possible that we still have got banks in Zimbabwe under those circumstances.
So if the Minister answers how he is going to solve that problem because we cannot borrow for production purposes because we can only borrow from money that is deposited by an individual or an organisation that would then want to use the money later. This is also what determines the rate, not the actual 200% rate that we have imposed. It is just an imposition on something that is not there. How many people have got their monies under their pillows, United States dollars? I would not want to move around with US$1000. I would want to deposit it, but there is no security in depositing my money in the banks. There is no assurance that I will get my money when I want it from the bank. I cannot make a deal on the assumption that I am going to use the bank to settle because you are not even sure. If the Minister could consider in his policies to make sure that the policies that he puts in place answer to the problems that we face on a daily basis. Thank you.
HON. MUSAKWA: Thank you Mr. Chairman. I would like to add my voice to the issue of bank charges, especially on transfer of funds. Mr. Chairman, it has become a big discouragement to both individuals and corporates to bank money. Imagine you are charged to withdraw cash but worse, you are charged more to transfer money from nostro to nostro which I thought you should encourage people to transfer money as opposed to withdrawing cash.
So now you are penalised for transferring and you are charged 4%. If a corporate transfers US$1 million today, they are charged US$40 000. Already, they have become uncompetitive. That is inflationary. If you charge that US$40 000, they will have to charge the customer. Already if they were bidding with another company or regional company, they have already lost because they have got 4% which maybe was supposed to be their profit but it has become a cost. I think we must encourage people to transact. At least if you are to encourage people not to withdraw cash, you must encourage them to transact into an account, but you are hit worse when you transfer into an account. It is very prohibitive.
Mr. Speaker, I think the Minister must relook at these issues and make sure that we encourage banking. There is a lot of money in people’s houses, bedrooms and gardens. There is one joke Minister which someone told me. They said one gentleman was told that the bank had gone on fire then he continued playing poker. The next thing he was told that I saw somebody digging in your garden then he dropped everything and started running to his home because his whole bank is in the garden. I so submit Mr. Speaker.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): I thank the Hon. Members for their contributions on this Clause 4. Let me start with the Hon. Mushoriwa. Of course the contributions were very similar. There were slight variations here and there. Prudent contributions, but largely focusing on the jump to 2% penalty, basically for withdrawing more than US$1 000 in cash.
Hon. Mushoriwa basically highlights that we have this big jump to 2%. Why is it so? The reason why we are introducing this cash withdrawal tax basically is to deal with speculation. It is not a revenue raising measure, it is to deal with speculation. What we found out in terms of our research is that individuals were going to the bank to withdraw large amounts of cash in United States dollars so they could trade in the parallel market. If you recall, this is a measure we announced when we mentioned that we needed to deal with the parallel market and I think it is fair to say this measure has contributed to the stability that we see in the market in addition to the sharp increase in interest rates to 200% in terms of the policy rate. So this is an anti speculation measure, it is not a revenue raising measure.
I now turn to Hon. Gonese. He was making a similar point. In his contribution he actually proposed that maybe we should lower it to 1%, that 2% is high. I am listening but we feel that we still need this measure to discourage speculation in the parallel market. I now turn to Hon. Biti who gave us a vivid case. When he was managing some trust funds, he found that he had to incur some charges in the withdrawal of those funds, but I want to be clear. Was this on the back of IMTT or rather it was a cash withdrawal tax?
HON. BITI: It was a cash withdrawal.
HON. PROF. M. NCUBE: With IMTT, you have no charges there at all. Rather it was a cash withdrawal. Why did you need so much cash?
HON. BITI: It was client’s money for a children’s home.
HON. PROF. M. NCUBE: And they wanted it in cash, this children’s home? Very interesting that is all I would say, but we still need a tax to discourage speculation, Mr. Chairman.
I now turn to Hon. Nduna. He made very similar points passionately about this 2% tax on cash withdrawals that it is discouraging banking. The same was expressed by Hon. Mpariwa and Hon. Sibanda as well. Hon. Chinotimba made a similar point that we need to promote banking. If I may digress there, but I am not digressing, this was raised by Hon. Members. Some of them expressed an opinion about the low deposit rates in the banking sector or none existence of deposit interest rates in the banking sector. Banks are in violation if they are not paying any interest at all. There is a law that I put in place to say banks must pay a deposit interest and this interest rate is linked to the 90-day Treasury Bill rate. The formula is very clear in terms of how they should be calculating their deposit rates as linked to the 90-day Treasury Bill rate.
So if they are not paying this interest, they are in violation of the law. Depositors ought to receive interest so this issue should not even be arising, but it is arising. Then there is the issue of banking charges. So when we are talking of our charges of 2%, 5c and so forth, that is revenue. Banks have their own charges and we are not involved in that but I agree that the charges are also high.
We have not, as a Government, wanted to dictate on bank charges. It was our hope that competition would take care of it but clearly that is not the case, maybe going forward we need to consider regulating bank charges. We are not there yet. We have been using moral suasion. As of now we are not there yet.
Then Hon. Chikwinya in terms of calculating the actual revenue earned from withdrawing USD175 from civil servants on the entire State. I think these are unnecessary drudgery. What we are trying to do in this tax is just a simple anti-speculation measure - that is all. We are not even paying attention to the amount of revenue raised. Our concern is to deal with speculation, why are people, individuals wanting to withdraw all this cash and where are they taking the cash to? Is it the case that they are taking the cash to the parallel market? That is our concern and we were not trying to raise revenue here.
Hon. Moyo also made a similar comment that we need to promote banking and this measure may not be promoting banking and maybe we should even consider reducing this 2% penalty to 1%. In terms of motivation, what motivated us to introduce it, I have been clear about that and it is to deal with speculation in the parallel market.
Hon. Nyabani also raised a similar issue regarding discouraging banking and even forcing certain banks to move out of certain centres or areas in our country to other areas. Hon. Markham and Hon. Nyathi also made similar comments but Hon. Nyathi went further to talk about the interest rates on deposits. I have already spoken about that to say these ought to be paid and banks are in violation if they are not paying this interest.
He made an auxiliary point about why we are paying a USD175 to everybody and why not vary it according to rank. This was not meant to be a salary to that recognising rank. It was meant to be something that recognises the fact that what we all have is the same basic basket. You need tomatoes, piece of onion, some vegetables and certain kilogrammes of meat and so forth. There is a basic basket whether you are the Minister of Finance, Hon. Biti, the Chair, Hon. Mutomba, the ordinary worker out there, there is a basic basket that we all consume and that is what we meant to recognise. It is not meant to recognise rank at all. That is why it is an allowance and not a salary although we have no intention of withdrawing it anytime soon. It is an inflation protector.
Hon. Madzimure focused mainly on the high bank charges, cash withdrawal limit and so forth. Of course, this is a different aspect around banking – what we are focusing on in terms of Clause 4 is cash withdrawal charges paid to Government. I agree that bank charges are high and they ought to come down. Cash limits were also introduced as a way of dealing with speculation in the parallel market and we continue to review these cash limits. I am sure the Central Bank will be reviewing sometime in the future these cash limits upwards and we have been doing that.
Hon. Musakwa again talked about bank charges being too high. This is money going to banks and that is not what we are debating. We do not go into that as yet but in future we should detect what bank charges should look like and what should be their profile and we should allow the banks to do in terms of charging our citizens for the money they keep in the banks only to promote banking. So, colleagues this clause is about dealing with speculation and not about raising revenue. I thank you.
HON. GONESE: Thank you very much Hon. Chairman. I am really grateful for the explanation given by the Hon. Minister. In light of the explanation by the Hon. Minister that this is not intended to be a way of raising revenue, it buttresses the points which we were making. I will illustrate how. The first point which I would like the Hon. Minister to appreciate is that all these issues are interlinked. The issue of interest rates was raised in this august House a long time ago, but the reality on the ground – those of us who operate bank accounts, maybe it is only that the Hon. Minister might not be operating a bank account and that is why he may not be aware that nothing has changed since we have been talking about this long ago.
It has been raised during question time and during clarifications on ministerial statements which had been presented in this august House. That issue has been raised time and again but on the ground nothing has changed. So for those of us who have been operating accounts, if any money hits your account and you do not withdraw it, at the end of the month, you will find that it is only the charges which will be reflecting and there is no interest whatsoever. I am appreciating and I am cognisant of the fact that we are debating an issue relating to withdrawal and I will illustrate the point further.
At the moment, Zimbabweans are reluctant to bank or to put money in the bank and this punitive measure is going to penalise both the guilty and the innocent and this is a point which I want the Hon. Minister to appreciate. When I talk of the innocent, I will give an example that in my other life I practice law. People who are entering into agreements of sale for immovable properties do not want their money to be put into the bank.
In the past, yes but when you are dealing with conveyancing transactions, lawyers have to accede to the wishes of the parties. The sellers do not want money to put in the account as a result of which the agreement of sale is done, the papers are signed, the interview with ZIMRA is organised quickly and the money will exchange hands once all the paperwork has been done.
It is no longer a question of the seller getting their money after the registration of the transfer simply because those sellers do not want their money to go into the account because they are aware of the charges when they want to move the money. Now it is going to get worse because if they were reluctant before the introduction of this cash withdrawal, punitive measures are going to worsen the situation because there are those people who may not be operating active accounts who are disposing of their immovable property and it is a one off transaction.
They are going to have money deposited into their account but because of this other tax of 2% for the figures above 1000, it then means that it is going to disincentify them. They no longer will be comfortable with having money deposited into their accounts. It will actually worsen the situation. I was going to say to the Hon. Minister, yes it is meant to deal with the speculators as he says but I do not believe that most of these dealers operate bank accounts. I think they operate on a cash basis and that is my thinking. Unfortunately, I am not fundi in that particular area of people who do these transactions.
My assumption would be that a lot of these people move around with cash in their cars. I do not think they are in the business of banking money and withdrawing it. So, I do not appreciate how that is going to deal with the speculators. If my assumption is correct, I am going to respectfully suggest to the Hon. Minister that this 2% is going to hit more of the innocent people, more of the persons who get money deposited into their accounts and not the dealers. The dealers do not bank money and I believe the money which is in the accounts is the ZWL because I think that those people who deal in foreign currency transactions, the money which are on their accounts are mostly the ZWL and not the USD.
The USD is moving around from briefcase to motor vehicle and so on and so forth. The Hon. Minister at the beginning of his response said he was listening and if he was listening, I am perplexed as to why he has not suggested a reduction in the figure because if he was listening as he said at the outset, I would have assumed that at least he was going to deal with the reduction of the figure of 2%. All the Hon. Members who have spoken suggested that 1% was more appropriate but listening to the Minister, I actually believe that it is not even the 1% lest we just stick to the 0.5% because he is saying it is not a revenue enhancing measure which the Ministry of Finance is trying to utilize for the purpose of enhancing their revenue, then it means at the end of the day that whilst the Hon. Minister is trying to ascertain exactly what is the effect of this, probably he must consider the plight of those genuine people who have money deposited in the accounts for various reasons. For instance, if they have sold a property, who is going to be penalised by this increase or introduction of penalty on cash withdrawals? I am going to implore the Hon. Minister, if he was listening, to then consider the reduction in the figure of 2% for transactions above US$1 000.
HON. PROF. M. NCUBE: I have listened to additional contributions by Hon. Gonese and also consulted my technical staff at the back, I now want to propose that we lower the 2% penalty for withdrawals above a US$1 000 in cash down to 1%.
HON. BITI: It is unfair to punish the majority of innocent Zimbabweans over the sins of small number of cartels zvigananda who are engaged in speculative activities. The Minister says that his move announced on the 7th of May by the President was a move to deal with speculators and not a revenue measure but how many persons in Zimbabwe actually have the money that they can use to engage in speculative activity on the black market?
We once called the Governor of the Reserve Bank to the Public Accounts Committee when I was still Chairperson and he confirmed that 90% of the deposits in the banking system were controlled by 12 companies, like Delta, Econet, Innscor and so forth. As I am talking to you right now, Innscor borrowed ZWL$46 billion from the banking system. Ninety percent of the people in Zimbabwe are not Innscor. They are not Kuda Tagwireyi, Simon Rudland, McMillans or Scott Sakupwanya. So, why should 90% of the population be held at ransom by speculators that are known because if the Reserve Bank is doing its work through its FIU, if the Ministry of Finance’s Economic Unit headed by Conrad Nyamurowa is doing its work, we know the culprits? We know who has over a US$1 million in his account right now. Every bank will tell you. These decisions must be based on science.
The 1%, I take it but when the Minister comes in November, he must give us the science justifying why the rest of the population should be penalised over culprits that are known, culprits that you can put a red mark on the bank. We know where Innscor banks. We know where Kuda banks. We know where Simon Rudland banks. The FIU at the Reserve Bank will say if this one withdraws, tell us, red flag. After all, banking standards are based on Know-Your-Client basis. We cannot be punished.
I gave an example of the children’s home that lost US$2000 in charges. Hon. Gonese has alluded to what is happening in the legal fraternity. Conveyancing is now offline. There is no money that is put in a trust account of a lawyer because of the charges. Once it is offline, you lose revenue. There is no lawyer that will take money from a seller. They will say we do the agreement and munosotana ikoko. We will do the transfer. What you do, we do not know and we do not care. The net result of that is that under-valuing of purchase prices, under-valuing of capital gains tax, under-valuing of stamp duty and who is losing, it is the taxman.
The problem is that when you increase too many taxes, you increase the propensity of tax avoidance and tax evasion. That is what is happening. When you lower taxes, there is natural voluntary compliance. That is a proven fact. The Minister is a professor in economics from Cambridge University and a former Dean of Business Studies at Wits University. He knows these things better than myself. You ought to be doing better. I thank you.
HON. CHIKWINYA: Firstly, let me thank the Minister for reconsidering the 2% for withdrawals above USD1000 to 1%. That spirit of concession is welcome. I just want to take us back to the response by the Hon. Minister in his first response to quite a number of Hon. Members who had made their presentations to the extent that the tax that is being proposed is to deal with speculative behaviour by individuals who are withdrawing money and playing with it on the parallel market.
I had given an example of USD175 and recently the Hon. Minister made policy pronouncements to the effect that the US dollar can trade parallel to the Zimbabwe dollar in shops. You walk into a particular shop and it is legal to buy using a US dollar or Zimbabwe dollar. I would give you an example; today in OK Kwekwe there is no sugar but sugar is available at Simrac and Simrac is not agreeing to sell the sugar in RTGS. It is only accepting in US dollars. The USD175 which a civil servant is obtaining is not for speculative purposes to go and change on the parallel market. It is only USD175. It is in response to the business that is beginning to reject the Zimbabwe dollar and only accepting the US dollars. There are well known shops and they are called dollar-shops where you find all these basic commodities being imported from South Africa but are only sold at US dollars. It is a reality. The Hon. Minister simply needs to take a walk to Mbare or any of these high density suburbs and you find quite a number of such shops that only accept US dollars.
The USD175 which the civil servants are earning cannot be subjected to this particular tax on the basis of speculative behaviour by other individuals who have got lots of money in their banks. I am not very good at coming up with this formula but I am sure the Hon. Minister can somehow factor a particular lesser percentage for civil servants who withdraw that USD175. To put it simply, if you may say USD175 is tax free, you find that the majority of civil servants are going to benefit because that is the only money that they get, anything above that is gotten through other means. The USD175 must be exempted from tax so that the civil servants can get at least a wholesome amount under which they have been given by Government. After all their RTGS salary is not benefiting them. It is the USD175 that is realistic.
I want the Hon. Minister to make a clarification on the effect of this tax to the withdrawals through money transfer agents, your Inbucks, Mukuru, and World Remit. What is the net effect because our relatives in the Diaspora are sending us the USD100 to cushion us from our economic challenges? If we are going to accept these 5 cents per withdrawals below USD1000, what is the net effect to the charges which are going to be borne at the money transfers?
Secondly, you know the people are currently supporting or supplementing living to their parents or relatives in the rural areas. So, you have found that money transfer agencies have set up shops in Chitekete, in Zhombe and all these rural growth points for our rural based parents to be able to access USD. Shops in rural areas are beginning on an incremental basis to demand USD. What is the net effect of agreeing to this tax of 5 cents charges to the money transfer agencies?
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Thank you Hon. Chair. Let me just clarify something. The way this tax ought to be administered is as follows: when we get to the now 1% threshold which we have reduced from 2% threshold; the 1% is paid on the extra amount above USD1000, I just want it to be clear – [HON. BITI: Inaudible interjection.]- That is really a marginal tax.
Hon. Chikwinya raised a very important point; he wants to know whether these charges are applicable when one receives money through a money transfer agency and the answer is no.
You have been singing out ‘civil servants’, this would be a very untidy way to manage such a tax. The admin will be a nightmare if we do this but he has made a proposal. While we would like to look after civil servants’ welfare sufficiently, I am not sure that we would achieve much by doing this or we just have created nightmares for ourselves in terms of administration.
So I still feel that the concessionary to reduce it from 2 to 1% for above USD1000, is a step in the right direction. I have listened very carefully to what Members have argued and I agree with them, so, I have given a concession and I think we should proceed.
Amendment to new Clause 4 put and agreed to
Clause 4, as amended, put and agreed to
HON. BITI: On a point of order! I do not see Dias from the Draftsman’s office, is there someone from the AG’s office because the amendments have to be recorded that the Minister on this Clause has agreed to reduce the 1% on the 2% of USD1000 and above.
THE HON. CHAIREPRSON: Hon. Biti, I am being informed that your concern is being addressed.
On Clause 5:
HON. CHIKWINYA: Thank you Hon. Chair. We have had a challenge that Zimbabwe does not have formal employment. Clause 5 proposes to increase withholding tax chargeable to cross border traders who do not produce tax clearance certificates from 10% to 30% with effect from the 1st August 2022. Now, the critical aspect to consider here is the target group which is the cross border traders. This group, the majority of them do not have tax clearance certificates because their business is informal. The Ministry of Finance, in fact the Government acknowledged their presence that we have informal traders because of the nature of our economic challenges, and they presented presumptive tax which presumptive tax ZIMRA is collecting at trading points. So, if you go into a flea market, vegetable vending market or hair salon, the people there are paying presumptive tax collected by ZIMRA.
Now, for us to then charge up to 30%, what we are doing is - we are increasing smuggling and corruption at the border post, equally inward because once a tax is too high; it creates a ground for the ZIMRA official and the trader to make a personal or inter-personal conversation and evade the tax. If a tax is affordable, it is easier for the trader to be able to give money to the Government. We are also pushing these traders out of business with an increase of three times. Having factored in their pricing model at 10%, they were lending perhaps a pair of shoes imported from South Africa at 15% but if you are going to push the tax up to 30%, that pair of shoe has to go up to about $45 because it has to follow the incremental of the tax.
So Hon. Speaker, I want to believe Hon. Prof. Mthuli Ncube is aware that we are having elections by July of next year. If we are going to tamper with this constituency Hon. Minister and Hon. Chair, I think we are simply creating a social upheaval from a constituency that has already settled for a particular tax of 10%. We need to be cognisant that the majority of these people were actually in formal employment in industry when industry was actually functional. Now that industry has closed and we have pushed them out of formal employment, they are now in informal employment; to go back and tax them I think is unfair. Remember they are the same individuals whom we have been taxing all along with IMTT and the five cents per $1 000. These are the very same people who are bearing all the brunt of taxes. In my view, I would seek the support of this House that this tax remains at 10% and never be allowed to move to any other tax higher than 10%.
HON. GONESE: I want to associate myself with Hon. Chikwinya and I also want the Hon. Minister to clarify for us the rationale or basis for which the Hon. Minister is seeking to increase this presumptive tax from 10 to 30%. Is it motivated by the need to raise revenue because I want to assume that in respect of this particular amendment or proposal, it cannot be motivated by trying to deal or as a way of trying to deal with speculative activities because these informal traders are actually looking for a way to survive.
Some of them, I know when I grew up, everyone would say I want to be a doctor, pilot, teacher and no one would say I want to be a vendor or informal trader. It is something which is driven by necessity. It is not like people enjoy being informal traders. In light of that, I believe that these people should not be penalised. As Hon. Chikwinya has rightly said, I believe it will actually force a lot of them to try to go underground. People will now try to evade paying tax because of the figure which is being proposed. If you are making a profit of
ZWL$3 000 and you are being taxed 30% of that, for a person who is just barely making ends meet, it is a lot of money or whatever figure one is making as an informal trader.
I therefore submit that tax should remain at 10%. I think that 10% is sufficient to enable the fiscus to get something from these informal traders. After all, most of the big guns are not paying tax. They are finding creative ways or creative accounting and so on, of evading taxes. I believe that the Hon. Minister, if he wants to raise revenue, he must really focus on those big companies which are not paying their fair share of tax. Let us have a situation where as other Hon. Members have spoken about the entities which are dealing in mining and so on, that is where I think the Hon. Minister should be focusing on and not focusing on the little person who is making very little in terms of profits. You want to take away that little they will have made by increasing the percentage that they are being taxed. I therefore plead with the Hon. Minister that on this one, please find other ways of trying to raise the money. Do not punish those people who have already been punished by the economy and the situation in our country. That is my humble plea to the Hon. Minister.
HON. R. R. NYATHI: Hon. Chairperson, I want to concur with the other Hon. Members that have debated before me. This industry is meant for the poor, widows and the orphans and many of those people that are here in Zimbabwe sent their children to school through vending. I was listening to the Hon. Minister of Finance when he was saying maybe these people that will be taxed do not have any import and export licences and if it is an amount not more than USD1000, they may not be taxed. However, what I have learnt from experience of those that are in this industry is that things have become too difficult for them and they have now devised systems of evading the normal borders. The revenue collection officers have road blocks and at times they take everything because these people have not even declared their commodities. In Makusha, there is a certain blind woman called Mai Simon. She told me of a story that she went to Mozambique to get things and she did not go through the border but she is blind. A policeman caught her and confiscated all her goods. Since that time, she has not recovered to go back into that business. When she tried to go back to recover her goods, she never got them. These are the kind of issues which are happening to our poor. I therefore think that the Minister must reconsider this. When we are talking big businesses that are in the business of smuggling commodities, yes, fine but to our poor people, I am saying let us keep it where it was or let us completely do away with it especially to an amount up to USD1000. So I submit Hon. Chairman.
(v)HON. TOGAREPI: Thank you so much Hon. Chairman. My view is, we are a people who should abide by the laws of the land. I think the Minister in trying to deal with the issue of smuggling and the amount of goods that we see on our streets, in our shops and flea markets that have come into the country illegally, they have come up with ways of actually destroying our industries and those who are trying to build manufacturing industries in Zimbabwe. So, I do not understand Hon. Members that we would want to deny the Minister to deal with a heinous thing that is destroying our economy today. My view is, if the Minister is going to say if somebody brings things through the legal market, the tax is low and if you bring it illegally and you are caught without declaring duty on the commodities that you want to come and sell in Zimbabwe, the cost should be high. I think it is time that we deal with those things. If you go to other countries, you cannot even bring in things even as a traveler they would want to see whether you are not bringing this thing for resale. If they suspect you are going to sell, they will charge you an arm and a leg. So, I think while we really symphathise with our people who are in the informal sector trying to survive, whatever they bring into the country, they must use the correct channels. My argument is that if we get these people bringing things into the country using formal channels, you come up with concessionary duties for them. Those who are found using corrupt ways and smuggling things must be charged 100% because we are not going to build our economy or protect our industry if we allow smuggling and people who do not want to use formal channels to import goods into the country. I think we need to differentiate the two. Protecting our people when they are doing their work legally and formally, we have no problem but if they decide to do it outside the channels, then we are defeating the whole effort to revamp our economy by allowing people to bring in things using illegal channels. That is my contribution. I thank you.
(v)HON.WATSON: Thank you Hon. Speaker for allowing me to contribute on this clause. Whilst I would like to agree with all the other Hon. Members who have spoken, I would just like to point out to the Minister that not only does the informal trader market apply to people who lost their jobs but also during COVID-19, it became sustenance for many. It also became a source of being able to access goods for many. So, I think that whilst we are talking about not encouraging smuggling, we also have to accept that our borders are extraordinarily porous and all we are going to do is drive informal traders back. Some who had stopped using those porous borders will go back to using them and it will not help to tax the few 30% instead of taxing the many 10%. I agree with Hon. Chikwinya’s first point to leave it where it is. I thank you.
HON. RAIDZA: Thank you very much Hon. Chairman. I want to support the proposal by the Minister for two reasons. I think the first thing is, the Minister by introducing the presumptive tax in this area is trying to deal with issues of compliance. I think these informal traders are expected to comply with certain provisions of our laws that they are not complying with. That is why we end up having this 30% presumptive tax. The first thing is these informal traders that the Minister is targeting are dealing on commercial goods and not necessarily these people who cross to buy little items. These people trading in commercial goods are also expected to contribute to our tax revenue which I think some of them are avoiding by smuggling their goods into this country. I believe that through the Ministry of Industry and Commerce. Certain goods are supposed to be brought into this country through an Import Licence, and some of these people avoid all these requirements and end up bringing their products or goods through illegal means. This is why the Hon. Minister is proposing to penalise these people using this provision of Presumptive Tax. Those informal traders, who would have complied with the law or the expectations of the law, will not be paying this 30%. Judging from most presentations made by other Hon. Members, it sounds like the Hon. Minister intends to penalise every informal trader by 30% - which is not correct, that is not correct.
What the Hon. Minister seeks to do in this, according to my understanding, is to say if you are not complying with what you are expected to be complying with, as an informal trader, there is a penalty for non-compliance. I agree with the other Hon. Members that our economy is largely informal but being informal does not mean that we must not contribute to our fiscus. Despite the fact that we are informal, we are expected to comply with the law. So Mr. Chairman, we cannot say we are doing business and then on the other hand, we are not paying taxes or we do not have the requisite papers. If I need certificates of good standing, to show that I am a tax payer, I should have those documents and with those documents, I will not have a challenge with the 30% that is being mentioned.
Why is it that we seem to be encouraging people to do business in the informal sector and that everything that happens in that business should be informal despite the fact that we are dealing with commercial goods? The moment you start dealing with commercial goods, you have to regularise your operations somehow. You have to have your papers in place, pay your taxes and do your business properly, that is what the Hon. Minister seeks to do here. Let us do business properly and contribute what we are supposed to be contributing. So, for me, I support the clause. I do not see any reason why we should be defending non-compliance in this House. We should be supporting the efforts by the Hon. Minister to say let these people who are operating in the informal industry comply – that is the whole idea of Presumptive Tax that is my proposal. I support the proposition by the Hon. Minister, and I think it is my right to say why I am supporting, that is exactly what I am doing. Those who are opposing can oppose, that is not a problem but in this one Mr. Chairman; I think that if we decide to do business, we should have the requisite papers and follow regulations. I thank you.
HON. NDUNA: Thank you Hon. Chairman. Hon. Chairman, I will propose as follows that at some point, there be 30% levied on informal traders but this is how I propose the Hon. Minister should go about it. First and foremost, enforce registration of the informal traders into the mainstream system and in the same way we established the Special Economic Zones where we have tax holidays for a certain period when investors are establishing in those geographical locations and special taxes in those geographical locations.
I therefore, ask that the Hon. Minister, after the informal trader has voluntarily registered to be tax compliant; I know there is a tax certificate that says you can withhold 10% if you are not compliant or if you are compliant and have been paying your taxes, you can get a clean bill of tax certificate. After voluntary compliance of registration, the Hon. Minister should give these informal traders six months before they can get that 30% withdrawn from them in order for them to conduct their business and show seriousness in the way they conduct their business. If they then pay their taxes, the Hon. Minister should then review that file after six months to say, you now are able to either continue operating your informal trade or we will now withhold 30% of either your gains or tax according to that cross border operation that you are conducting.
I say this Hon. Chairman because there was a year where we conducted an operation called, ‘Chikorokoza Chapera’. Gold fell from 19 tonnes to 1.9 tonnes in that year because all the artisanal miners went underground. They continued to operate but did not remit their gold to Fidelity. There is an appetite to be delinquent and circumvent the law if you over regulate, this is my thinking.
Currently, the Hon. Minister is able to get by hook or crook, a pittance from the informal traders. There is a risk of drying the little that he is getting because as long as we are not computerised, as we are, who gains from hiking of taxes by the Minister of Finance and Economic Development is the police and everyone else who is policing those cross border checks because they then go to nocturnal lines of operation. They go and pay 10%, as opposed to paying 30% to Government. I will say it this way Hon. Chairman.
I have a recent experience where I stayed in the cells overnight. I had 10 people that I shared the cell with and I asked them what their issues were. What they told me was shocking. The other one said that I was found with 23 sachets of marijuana of USD0.50 cents, that is ZWL10.00 but the policeman said, if you give me USD300.00, I will let you off. I gave him USD200.00 and he said he was going to commit me to the cells and when my relatives had given him the other USD100.00; he would let me out at any time. True to that word, at midnight, the police came and unlocked the cells, and the young man went out.
Which court is open at 12 midnight? What was the reason for somebody to be removed from the cells at 12 midnight? So there is collusion, corruption and more corruption because of the fear that has been put into the prisoner by the police to meet their own ends. So who benefits here is the police and Government has not benefited anything, if at all, Government has not given a fine to this youngster with marijuana. So there is no tax going to Government, as long as we continue to hike the taxes, the taxes for corruption are also being hiked.
I have just given you an example for the police. There is another young man who was arrested and the police said, we want $80 and he produced $60. They said we will commit you to the cells, and when your relatives have given us the other $20, we will let you out. True to that, at 7 o’clock in the night the young man was removed from the prison. It means the relatives had played their part but Government had not benefited anything. You see, it is overregulation and overtaxing. We will make sure that the law enforcement agencies that are corrupt get to win at the end of the day. All this I am putting across to you is something that can be investigated because the day I was inside is known. The day these youngsters were inside is known. Their names and addresses are known. So we can, according to Isaiah 6:1 , ‘In the year that King Uzziah died, I saw the Lord ...’. We can learn something because of the hiking of the tax and the debate that has ensued here so that we can kill two birds with one stone. My clarion call is hike but along the lines that I have proposed Mr. Chairman.
HON. I. NYONI: Thank you Mr. Chairman. I am going to highlight one or two issues. First of all, the withholding tax – this tax is also there in companies. If you do not have a tax clearance certificate, 10% is deducted when you receive payment. On importation, if you do not have a tax clearance certificate the withholding tax is also 10%. As regards the issue of cross-border traders, it is a bit on the higher side. Perhaps it is important that the Minister relooks and aligns it with the one that is levied on companies who import. The cross-border traders, besides the 10% pay customs duties at different rates. Goods are levied custom duties at different rates. Some are 5%, some are 10% and some go as far as 40% of the value for duty purposes. So it does not mean that the cross-border traders do not contribute to the revenue to the fiscus. They do pay. We all know that on top of that they also pay VAT when they go to the shops. When they also do their transactions, the 2% IMMT tax is applicable to them. This will definitely be an incentive for the cross-border traders to dabble in smuggling of goods.
We are aware in our ports of entry, for example Forbes Border Post and Plumtree, there is a lot of space where people just walk across the border. Beitbridge at least there is a river there, but still there is a lot of smuggling that goes on. If the tax is very high, it is an incentive for people to smuggle. It is an incentive for these other people who thrive on taxing the smugglers. If the smuggler is charging you 10% while you pay the actual duty plus the 30%, the incentive is there for one to smuggle the goods. My point is that let us keep the tax reasonable.
Before I wind up, the issue of tax clearance certificate, if you are a first timer, it is easy to get. Thereafter, you have to have all your paper work in place and you have to submit online on the ZIMRA e-filing system but unfortunately, most of the time the ZIMRA e-filing system will not be working. I know some of you who are business people here, will agree with me that at times you will have to wake up midnight so that you can access that system because during normal working hours, the system is just not working properly. I do not know what the reason would be and I do not think the cross-border traders will wait to submit such papers up to midnight. That is why I think it is very important that the Minister must make it simple and straight forward. Do not make the tax complicated. If it is easy to pay the tax and the figure is reasonable, we will have a lot of compliance going on.
In brief, my call is that the Minister should leave that at 10% of whatever figure instead of increasing it to 30%.
*HON. R. NYATHI: On a point of order Chair. I think we are now debating issues that we are not supposed to be debating. I think the Minister is saying that the cross-border traders are allowed to bring in goods worth one thousand dollars but those who have businesses should have export and import licences. If such a trader does not have the license and is caught smuggling goods, they have to pay the 30%. That is my understanding. I do not think he is saying everyone who is passing through the border should pay 30%. I stand guided – [HON. MEMBERS: Inaudible interjections.] – That is why I raised a point of order. I want to understand what we are debating here. According to my understanding and I stand guided, because in my opinion we seem to be debating the wrong issue. That is my opinion.
HON. I. NYONI: In conclusion Mr. Chairman, the Minister should consider leaving the withholding tax at 10% instead of 30%. Also for the benefit of other MPs, we are talking about import of goods. We are not talking about local withholding tax. On import of goods there are goods that need an import licence. There are goods that need an agricultural permit. There are goods that need a bio-safety permit, various permits of all sorts. In the case of an ordinary cross border trader who brings normal goods, you do not need an import licence. Thank you Chairman.
HON. T. MOYO: Hon. Chair, I have looked at the clause and concluded that the clause is very progressive. I have to substantiate my views. It is progressive in the sense that it seeks to increase withholding tax from 10% to 30% for those traders who fail to produce tax certificates. A trader who sells his/her salt should be a person of integrity; a person who respects the law; a person who is compliant to the dictates of law. In this case, those who fail to comply are those who are going to be affected by the 30%. Otherwise this is a very progressive law. It will act as a deterrent measure for those people who would be doing fuel contraband trade; illegal trading across the borders. So, I support the Hon. Minister for this progressive clause. Thank you.
HON. BITI: Hon. Speaker Sir, this is a very unfair, exorbitant and punitive proposal. The Minister’s proposal is to raise the withholding tax on cross border traders from 10% to 30%. This provision is unfair because the regime of withholding tax on people that do not have tax exemption certificates across the length and breadth of the economy is 10%. So, what is the rationale of isolating cross border traders and say you pay 30% and the rest of the population is not paying more than 10%? This tax is also irrational in that there is no definition of a cross border trader.
I heard Hon. Raidza and Hon. Nyathi argue that this is only targeted at traders but there is no definition of a trader. So, any person who brings goods from South Africa becomes a trader and is automatically slapped with the 30% withholding tax. Since there is no definition of a trader, no distinction is made in respect of an ordinary citizen who already has his rebate; I think it is at US$300. I do not know what it is right now. It is also unfortunate in that the person who actually declares his goods and pays duty is the one who then immediately finds himself slapped with an additional 30%.
You are formal. You have not decided to take your goods through the river, in Limpopo or through the mine infested border between Zimbabwe and Mozambique, Forbes Border Post. You are actually in the queue. So, you pay your duty and the next thing the tax man says pay another additional 30% because we think you are a trader, you are going to sell these goods. So, what in fact you are doing is to say to that person who is innocent, in addition to the duty you have paid, you have got this extra tax. It is irrational and all you do is to create a huge pool of illegal smugglers into the country.
What is the mischief that the Minister is trying to do? The Minister says he is trying to deal with the issue of non-compliance but it cannot be non-compliance that is just targeted at cross borders that you are now saying 30% when the rest is 10%. The problem with our borders is actually not the people who come through the border formally, because those are in the system; those are visible. The problem at Beitbridge, Nyamapanda, Forbes, Kazungula and Mukumbura, all the border towns in Zimbabwe, the problem is illicit smuggling by big fish.
As I am talking to you right now, only two days ago, the South African Revenue Services (SAS), obtained an order against a company called Gold Leaf Tobacco Company owned by Simon Rudland. The preservatory order was for three billion Rands. What was happening was that Simon Rudland, a Zimbabwean, was smuggling gold and tobacco from Zimbabwe into South Africa. Then once it lands into South Africa, he sells the gold and tobacco illegally and then puts the money in different satellite accounts; proxy accounts of different individuals. Those proxy companies will then deposit the money at Gold Leaf Tobacco accounts at Sasfin. Once the money is there, unsuspecting employees of Gold Leaf Tobacco will then delete the transactions and then in minutes the money is then shipped to Dubai into a bank in Switzerland. If you go to www.mevrick, you will see this report now. I can also give you the case number of the South African case in the High Court of Pretoria.
What the Minister needs to be coming up with are measures to deal with Simon Rudland, not with Mrs Ezra who is trying to sell three doils for her child to go to Mzilikazi High School. What the Minister needs to be dealing with is Simon Rudland at Gold Leaf Tobacco, that is the mischief, not mai Chemhondoro of Ngezi who is trying to raise money to finish the roof that was left by her husband who was killed in Mucheche bus service at Chivake in 2004. That is the problem with all his tax measures. They are targeted at the small person when the big fish are there. So you are chasing the small…
HON. RAIDZA: On a point of order. My point of order is that in the Bill, the Minister is talking about the informal traders who are doing it on commercial basis. That is what we want to hear. - [HON. MEMBERS: Inaudible interjections.] – I think I am entitled to raising my point of order.
HON. MADZIMURE: Chair, he can still come and debate, not a point of order when someone is debating. No, it is not proper.
HON. RAIDZA: Can I finish. Clause 5(k) says informal cross border traders thirty percentum of the value for duty purposes of the commercial goods. I am saying this so that we help each other so that we can follow the Hon. Member’s debate. He is dealing with commercial. That is what we want to hear.
*HON. BITI: We do not have documentation that shows that at this stage we are dealing with commercial and at this stage we are now dealing with individuals. So all that is taken as the same but customs is the one that says your goods have become too many so I am putting them as commercial because we do not have the definition. That is where the challenge is with this law. That is why we are saying the tax should remain at 10% because the individual who has come and is in the queue to pay duty is not informal because he is paying duty and hands over his duty payments to our ZIMRA office.
Hon. Raidza thinks that there is a definition of formal commercial goods. There is no definition for that. It is not there. So I think this policy should remain at 10%. The solution for the Minister to deal with informal trade is not to deal with informal trade through the Finance Bill. He has to come up with a separate independent Bill that creates incentives of transforming the informal sector into the formal sector. He has to come up with a formal mechanism of how to transform the dead capital trapped in the informal sector into live capital. I know he has read Hernando’s book, Dead Capital and how you create incentives firstly through legal registration, in other words the legal regime, the law. So registration is very important, licencing is very important. Secondly, through creating tax incentives as opposed to increases in taxes because when you increase taxes you actually expand the informal sector because people hide away from paying taxes, but when you create incentives for registration, people will register. That should be done in a comprehensive stand alone Bill, not peaceful measures whose making fact is in fact to force people to go underground as Hon. Nduna put it.
So I urge my good friend and neighbour in Chitungwiza to simply maintain the status quo of 10%, then to actually come up with a comprehensive piece of legislation that deals with dead capital at two levels, the level of legalisation or registration and the levels of incentives. I thank you very much Chairman.
*HON. HWENDE: Thank you Chair. I want to put emphasis on the issue of maintaining the 10% for the few months left in the year so that the Minister can have time to go and reconsider and look at the impact of the 30% on the cross border traders because as other legislators have said, raising capital to go across the border to go and buy is not easy so most of them get capital from micro finance houses and 30% per month is the interest rate from the microfinance houses. So then you take USD1 000 and you need to pay 30% and then the border charges, you an additional 30%. At what price are you going to sell the goods not forgetting transport? So it comes back to the ordinary consumer.
Minister, we are trying to penalise the wrong people because the leakages that are at the borders, the border is porous and they are serious. As we speak, are you aware of the fact that there are people who are importing fuel in Mutare? Trucks go through and they are working with the police at roadblocks. Those are the businessmen known as the mbingas. A few were arrested who imported fuel in trucks and they were saying it was water and they were evading tax.
If you go to the airport, yesterday we were talking of border controls, there are cartels right from the defence forces to the police force who, once you clear your goods, follow you and they use their phones to say your things are worth this much and the prices. What they are trying to do is to create an avenue for bribes. If you go to any border, the police have assumed the role of the ZIMRA officials. Even after being processed by ZIMRA bribes are being done. So people are struggling and a lot of them are bribing. If you want to smuggle your goods, you just give the driver or the conductor your R500 and you do not pay duty, no presumptive tax, no nothing – [Laughter] -
My point Hon. Minister is that at the moment as you can see, some of them are even here. I am sure you have a starting point and if you take him aside, you will get more information – [Laughter.] - My point Minister is that let us suspend this and maintain the 10% until you bring the budget, until you engage in research on the impact. If we are to deal with our porous borders and close the leakages, we will succeed. Our industry capacity utilisation is still very low and those cross borders are actually brining in goods and augmenting our industry which is not producing enough.
This is an issue concerning the people and the smugglers, the white clothed and bearded gentlemen are the ones smuggling goods into the country. So let us look at dealing with the closure and plugging the leakages through our porous borders. I thank you.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Thank you Mr. Chairman. I thank the Hon. Members for their wonderful contribution. I also appreciate some of the humour and the passion. It is needed, it has been a long day.
Let me start with Hon. Chikwinya, but what he mentioned and a lot of other people mentioned which is that he feels this tax is rather high, it is a disruptive tax in terms of the increase from 10% to 30%. The same was raised by Hon. Gonese, Hon. Nyathi, Hon. Watson, Hon. Nyoni and Hon. Biti.
Let me start with the rationale, at the risk of repeating. This is a simple compliance measure. In our research this is what we found and there are large formal businesses that are operating locally who want to avoid import duties. So they find several smaller traders whom they give money to cross borders and they bring in goods and these are smuggled and so forth. So mission accomplished and tax is avoided. The entities behind these informal importers are formal registered businesses that are just doing it for the sole purpose of avoiding taxes. We want to stop that.
There is a definition of what a commercial trader is. A commercial trader is someone who is trading values of USD1000 and above. These are commercial traders who seek to avoid taxes and we do not want that to happen. We want them to comply and we want them to register. We also want their handlers to also comply. This is what this is all about. It is a compliance measure and not a revenue measure; that is all. I think Hon. Members should understand it for what it is.
I thank Hon. Togarepi, Hon. Raidza, Hon. Nduna and others for being supportive of this measure. This is a simple compliance measure at the risk of repeating. We want to make sure that we reduce informality. Members stood up in this House to argue very eloquently about the need to reduce informality. There is need to broaden the tax base and that is what they have been arguing. Here we are kindly trying to deal with informality to make sure that everyone tries to register and now they argue against it.
If you register, what is the problem? You do not pay the 30%. We are not talking about the ambuya that was referred earlier on who is trying to bring in two boxes of doilies to sell and pay school fees. That is not the person but we are talking about a bigger fish who does not want to pay tax and wants to avoid tax and that is what we want to deal with. That is all. I thank you.
HON. MUSHORIWA: There was a special request which I think the Hon. Minister need to consider. Hon. Hwende had moved because remember we are doing this supplementary budget for the next few months and what I was going to suggest is just to support and emphasise on the point that Hon. Hwende had come up with. I think it is imperative we retain it at 10% for the time being and the Portfolio Committee on Budget and Finance went through the various borders. I am also aware that the Portfolio Committee on Defence and Home Affairs also went through the borders. What we will do is to help you Hon. Minister when you craft the 2023 budget so that we see and come up with a proper researched position.
You had already pointed out that this is not a revenue measure but it is compliance. So in terms of revenue to fund your supplementary budget, it is not going to affect much. My plea is that for the sake of these few months, we retain it at 10% then we will make a commitment from the Budget and Finance Committee and the other Committee on Home Affairs to try to help you Hon. Minister because the question of border management is an issue, we need to see how best Government can get maximum revenue. This is my plea and I think the request should be easier Hon. Minister to consider. I thank you.
HON. BITI: The introduction of withholding tax on cross border was not inserted by the Taxing Act and the Taxing Act is the Income Tax Act. It was inserted by the Finance Act and the amendment which we are talking about is an amendment to the Finance Act and not to the Income Tax. I can assure you Mr. Chairman that there is no delineation, there is no definition that separate trader, commercial trader and the definition of 1000 he was talking about.
The Minister knows that I know the Finance Act because we have been fighting over his over use of Section 3 of the Finance Act, in particular Section 3 (2) of the Finance Act lacking statutory instruments that have been amending Acts of Parliament. Hon. Gonese who sitting over there won a case against Statutory Instrument 96 of 2022, which is the subject of the next amendment in this Bill which we are dealing with on Section 6. Hon. Gonese has got a judgement against that Statutory Instrument 96 and I was the lawyer. So I know what I am talking about.
If he wants to persuade us about the delineation which is the argument of Hon. Raidza, let us put it in the statute so that we know who we are targeting because there is a lacuna, there is a gap, kwashiorkor in the legislation as I am talking to you namhla khatesi, question of law, but question of economics, why choose cross border traders only to impose a punitive tax of 30% when every other person who does not have a clearance certificate is paying 10%? Why are you trying to deal with, whether it is smuggling or those runners on a piece meal basis? Why do you not come up with a separate piece of legislation?
That is our point and I support my brother Hon. Mushoriwa’s suggestion that we are already in September and tomorrow is the 1st of September, of which you have already started on your 2023 budget. You have already done the Budget Strategy Paper and in two months time after the Congress in October, you are bringing the budget here. So, we can wait in November after the Congress then we pass the budget with the new proposal. It is coming in October and it is very simple Hon. Chairman. Let us wait for Congress and we come here and pass the Budget. Thank you Mr. Chairman.
HON. I. NYONI: The Minister highlighted that some of the cross border traders are being used by some companies not to pay full revenues that are due to ZIMRA and the fiscus. Can I also point out that in terms of the Customs and Excise Act, ZIMRA has the authority to do post importation audits. They can visit the various companies and check whether the goods that are in stock were cleared on importation. Usually there will be the normal bills of entry to prove that whatever goods were imported normally. In terms of legislation, I think it is quite sufficient. What needs to be done is to capacitate ZIMRA so that they do more post importation audits.
*HON. MADZIMURE: The Minister said that he knows the people who are abusing the facility and he said these runners. Since he knows the beneficiaries, why can ZIMRA not visit those businesses and then penalise those people? Secondly, is the Minister aware that most people who are operating shops have no tax invoices including the Chinese? I do not think it is a good idea for him to penalise all the people because of a few who are engaging runners, it is not right. The law must be made so that everyone follows it. I think the Minister should go to those people who are engaging the runners and deal with them so that they prove that what they are selling was properly imported. I am saying for now, leave the 10% as it is and then you address the matter later in the year.
*HON. CHINOTIMBA: I do not want to say much suffice to thank Hon. Biti and Hon. Madzimure who know very well that we are going to Congress in December. That is all that I have stood up to say. In addition, I would want to say a few words on the issue of people who are depriving Government of revenue. I would like to say that I do not think it is a good idea to penalise cross border traders who are hard working. I know that the Minister is aware that there is corruption and smuggling at our ports of entry. Some of the things happen in broad daylight and as Members of Parliament, we just fold our hands. All the people who are engaged in corrupt activities must be brought to book because Government is being prejudiced of the much needed revenue. All the offenders must be given a blanket sentence, whether they are cross border traders or their handlers.
HON. PROF. M. NCUBE: Once again, I thank the Hon. Members for their effervescent contributions. First of all, I want to deal with this issue of definition because it is very fundamental. I would like Hon. Members to refer to the Finance Act of 2020 in the Schedule for Monetary Values, Section 38 under the Customs and Excise Act. It is spelt out in there. Just take a look because we say that any goods that are above USD1000 need a bill of entry and if they are below that, they do not. That is where it is captured. We should go back to that schedule, it is clearly defined – [HON. BITI: Then I am right.] - The Hon Member is actually wrong and he should be happy that I have corrected him and pointed him to the right area.
I now come to the issue whether 30% is high or low. I think we have been debating this for a while. It is an important issue; we need these agents to comply. I am going to propose a compromise. As I said, we need this to be in place. Ukabata mwana, amai vacho vanochema. So, if you catch these cross border agents, the handlers that I talked about earlier on will cry. We need this measure to force compliance. I am going to make a proposal that we reduce it from 30% to 20%. I thank you.
Amendment to Clause 5 put and agreed to.
Clause 5, as amended, put and agreed to.
On Clause 6:
HON. MUSHORIWA: Thank you Hon Chair. Clause 6 has got two problems in my view. Firstly, the 2% tax which is the intermediate money transfer tax; they are saying the transaction which is now exempt from the 2% has now been moved from ZWL1000 to ZWL2500. That, Hon. Chair is a misnomer; given the fact that you are aware that the time when we passed the budget, the auction rate was at 85 and the rate has now gone to 480. Then if you actually put that allowance of 10%, it goes to around 500.
It is imperative that the Minister needs to move the tax exemption or the 2% exemption should be moved from ZWL1000 to at least a figure of about ZWL5000. Failure to do that, you are not helping the poor and like we have already mentioned, there is always a compensatory measure; you do that, it allows the people to spend more money.
Secondly, the B part, it is now said that the IMTT will be charged at 4% for transaction in USD. I think it is wrong in my view. When the Government made a decision to allow a multi-currency system, when they introduced the USD, I do not understand the mischief but I think it is wrong to then have a situation where you charge 4% on USD transaction and 2% on ZWL transaction. The challenge you then face and this is a major one. Do you know that many companies or the small companies; you go to Siyaso or any area where there is commercial activity, people that are charging in USD, most of them do not have tax invoices? None of them is paying tax. You are actually creating an avenue for tax evasion, tax avoidance primarily because you have actually increased the USD charges. We need to make sure that if it is 2%, let it be whether you are paying in Rands, ZWL or USD. Our system should be uniform and consistent.
Hon. Chair, I believe that intermediary money transfer tax, we increase it from ZWL1000 to ZWL5000. On B, we remove the word ‘four’ and replace it with 2 so that the 2% is also charged on USD transactions. I thank you.
HON. T. MOYO: Hon. Chair, I wish to contribute to Clause 6 on the minimum that is not taxable. Whilst I appreciate that IMTT contributes immensely as a way of collecting revenue, I have a same feeling that ZWL2500 is very little and I suggest that the minimum or the maximum that should not be taxed is ZWL5000. I think that is a way of giving our customers, the Zimbabwean populace to be not taxed and they can also have some disposable income. I thank you.
HON. BITI: I will be very brief. I support Hon. Mushoriwa’s suggestions that we increase the threshold from ZWL2500 to ZW5000. I also support very strongly that we should harmonise the tax rate on all currencies which used the law anyway, we harmonise the tax rate on all currency not to have a lower rate for the ZWL and a higher rate for the USD. So, we should merge (a) and (b).
My real concern Hon. Chair is on Clause 2, which says Statutory Instrument 96 of 22 as it affects Section 22(g) of the Finance Act is hereby validated. From a purely legal point of view, this provision is totally unnecessary because section 32 of the Finance Act says any regulation made by the Minister in terms of Section 3 will die unless within six months the Minister gazettes a Bill and he has gazetted a Bill in five months. So, the mere act of gazetting this Bill validates that.
So, subsection 2 of 25 is unnecessary because it is covered by Section 3 (2) of the Finance Act. My serious concern lies with section 3 (2) of the Finance Act. Section 3 (2) of the Finance Act allows the Minister to make any regulations which can override an Act of Parliament. I have a concern Mr. Speaker that the Minister cannot override what we would have enacted as Parliament. The Minister cannot override Parliament and what the Minister has been doing has constantly been overriding us as Parliament.
So, I would like to submit to the Minister not to abuse section 3 (2) and perhaps in December, propose an amendment to section 3 (2) of the Finance Act when he brings in his finance. For now, it is too late so that we take away his power. We have given him the power to make any regulations, provided that any regulations he makes he cannot override Parliament, which is what consistently he has been doing. That is why he is seeking that validation. That will be my submission Mr. Chairman.
HON. NDUNA: The differentiation of the IMTT tax on RTGs and USD from 2% to 4%, because of choice of currency, it in essence banishes the banking of the USD. It is called DOA, dead on arrival. We are trying to encourage the USD to go in the mainstream banking sector and I will give you the reasons why. Hon. Chair would know that he sold his abattoir to me and when I buy cattle I use USD. Those people in the rural areas do not bank the USD but how does my USD go into the mainstream banking sector? When I slaughter the cattle and supply to the buyers, naturally when the citizens buy the meat, somehow there is some tax that goes to the Minister of Finance but I can bet you my last dollar, the USD that I have left in the rural areas will never find themselves into the banking sector so long as there is the threat of raising the IMTT to 4% as if it is the USD.
I want to bring the Minister back to the time when he introduced the IMTT. It was 2% across the basket of currencies. It would be interesting to know why he now needs to raise it from 2% to 4%. I would want to know from him; maybe he can convince me to think otherwise. At this point, I am not convinced that this is a panacea and antidote to the issue of the disappearance of the USD from the mainstream banking sector. I would appeal to the Minister’s conscience and heart that he maintains that it be on 2% as we have adopted the basket of currencies. I wish and as I do to get answers as to how this was contemplated in the very first place.
HON. PROF. M. NCUBE: Some colleagues are raising issues around this Clause 6. We have done our research and we feel that the thresholds that we are proposing are the right levels. Also Hon. Nduna wanted to know why the percentage threshold was different for USD. Again, this was to deal with speculation. We felt that it was needed to deal with speculation this way by raising the IMTT weight for USD transactions.
We also felt that this will be a way to promote the use of the domestic currency. Again, it is a probing tax argument that you penalize the currency that you want to discourage more than the one that you want to encourage. We wanted to create a level playing field for our domestic currency.
I now want to come to an issue that Hon. Biti mentioned about having won a case and all that. Ah Biti, hamuna kuhwina. Aiwa ndakahwina inini zvakakwana. I will show the papers. What they were trying to do Mr. Chair, they were trying to take away my powers to run the economy. No judge will agree with that Mr. Chair – [HON. BITI: You are amending Acts of Parliament.] – Aiwa, no, certainly the judge concurred with me in the end that we need to ensure that the Minister of Finance has the capacity to run the economy and to change policies but of course, come to Parliament when it is necessary and I do that. Perhaps this is an issue that we can take offline. It is not the issue that has to do with IMTT really but he raised it and so I had to come back.
For what it is worth, I have been taken to court a 120 times since 2018 and I have defended 120 cases, all successfully. That should be a lesson to colleagues that they should not spend too much time in court. VaBiti, ibvai kumacourts. Siyanai nemacourts. Ndakutaura zvimwe asi nenyaya yeIMTT, I think his proposals are reasonable. Really, let us support them. They have assisted us in managing the economy, dealing with speculation and arbitrary behaviour but also raising revenue and also making sure they can broaden the tax base. I thank you.
HON. MUSHORIWA: Hon. Chair, I do not what research the Hon. Minister did but I want to just bring it to the basics. The price of 2kg sugar, 2lt cooking oil, 2kg washing powder and 2kg flour is costing more than ZWL$2500. Hon. Nduna said we need to go back to the genesis of this 2% tax and what the Hon. Minister told us when he came before Parliament, it is crucial that we move from ZWL$1000 to at least ZWL$5000. If we do not do that, the MPs, as representatives of the people will have failed because we are supposed to represent the people. What I am telling you are the concerns that the people in Dzivarasekwa will raise. The second issue is that the Hon. Minister cannot brush aside the question of the 4% tax. When the IMTT was introduced, we were using multiple currencies. Two per cent tax was being charged on US dollar transactions and 2% tax was being charged on the Rand. So, the Hon Minister cannot try to justify and say that if you use 4%, it will help people to move to the ZWL. What people will simply do is to continue to use US dollars but outside the formal banking system. So, we should make sure that the 2% be across the board so that we have that US dollar coming into the system. If we continue to do this, we will have a situation. Right now there was a point which was raised when we were discussing the 30% withholding tax. Do you Chairman know that most entities that are run by the Chinese and Nigerians in Zimbabwe charge for their goods in US dollars and I can assure you that less than 15% of the money that we pay for the goods comes into the formal banking sector? It is the fiscus that is actually suffering and to that extent, I think the Minister needs to really look into those things. If we do not do that then we are not doing justice to this country. I thank you.
HON. GONESE: I hope that the Hon Minister is consulting with sincerity. I am aware that you may not have gone to the supermarket for a long time. I do not think you go shopping as we do ourselves. If you were doing so, you would have noted that the prices of all basic goods as alluded to by Hon. Mushoriwa have actually gone up. When you are looking at the sum of ZWL5000 in terms of what it can buy, it is very little and it is in that respect that I plead with the Hon Minister to appreciate the difficulties the majority of the people of Zimbabwe are going through. As a result, it will be very appropriate to increase the figure upon which this tax is applicable from ZWL1000 to ZWL5000. In respect of the differentiation between the two currencies, the Executive through the Hon. Minister realised that we had to revert to the multi-currency regime for a purpose. The rationale given by the Hon. Minister that he wants to discourage the use of the US dollar, I do not think it is appropriate because people have to use the US dollar for various reasons and one of them is that the goods are actually imported.
After the Hon. Minister realised the folly of their decision to promulgate an instrument which actually said that only the Zimbabwe dollar was the currency which was supposed to be used, they actually had to reverse that and once they did that through S.I. 33, it became very clear that the use of the US dollar was driven by necessity. So I do not see any reason why those using the US dollar should be penalised. Also there should be no differentiation. The IMTT should just be across the board and if it is the same percentage for the ZWL and US dollar, I think that it will serve our country very well. There is no purpose or point in saying that we want to discourage the use of the US dollar because the reason why the US dollar is still in use is not because people do not want to use the Zimbabwean dollar but it is because of the fundamentals which have actually dictated and meant that the Executive, that the Hon. Minister had to eat humble pie. I know that he had a convenient excuse that it was to deal with the COVID pandemic but the reality on the ground was, he realised it was no longer feasible to continue using just the ZWL. For that reason, I therefore implore the Hon. Minister to accede to our request and to reach a compromise. Also remember Hon. Minister that this is a point which has been raised by all the Hon. Members who have contributed to this debate unlike on the other clauses where some of the Hon. Members were of the view that there was justification. On this particular clause, I believe all the Hon. Members who have contributed have agreed that those two issues should be amended in such a way that firstly the figure be raised to ZWL5000 and that there should be no differentiation between the two currencies. For that reason, I submit that the Hon. Minister should compromise as he has done on the other clauses.
HON. BITI: We urge the Minister to accept the movement to ZWL5000 though it does not buy anyone anything; ZWL2500 does not buy you anything. I challenge the Minister to point out anything in Zimbabwe that costs ZWL2500, including bubble gum. So, you are just giving minor relief, otherwise it should have been ZWL20000. So asking for ZWL5000 is just common sense. It is just an appeal to reduce administrative taxes on a tiny amount. The rationalisation and harmonisation of the taxes makes sense to use 2% on both currencies. The Minister cannot say we are encouraging the use of the local currency when his de-dollarisation process imposed by Statutory Instrument 33 of 2019 and Statutory Instrument 142 of 2019 failed because the dedollarisation process was introduced without the requisite conditions in the economy supporting the return of our currency. So he has had to eat humble pie. You cannot punish the people of Zimbabwe to say, use my money when you should not have introduced the money. You introduced the money prematurely. So, do the right thing, just make it simpler for everyone, everyone will know that I am paying 2% transaction tax whether it is the USD or ZWL. It is not an indictment on anyone; it is not an acknowledgement of failure but just common sense.
Then sub-provision 25 (2) is unnecessary, he must go and read Section 3(2). It says, once you gazette, you have validated the Statutory Instrument. So Statutory Instrument 96 of 2022 was validated on Friday, when this Finance Bill was gazetted, so you do not need an extra validation in the form of the proposed Section 25 (2) – it is superfluous, that is all I need to say Mr. Chairman.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Thank you Mr. Speaker Sir. First of all, I want to put it on record that the introduction of the ZWL is a very positive thing. Now we have full Monetary Policy, and domestic currency. Of course, we have allowed the foreign currency to circulate along with our domestic currency and we believe that this is the right model for us to manage our Monetary Policy. So I certainly disagree with Hon. Member Biti on his assertion that the introduction of our currency was a wrong move. It was a right move; we are now a more competitive economy as a result.
Now, on the arguments presented by colleagues about raising the threshold, again, I have reflected with my team. I propose that this be moved to USD4000.00, so we reset the tax exempt transactions from ZWL1000.00 to ZWL4000.00, I compromise on that one. Thank you.
Minister of Finance having consulted with his staff.
The staff was giving me something else which I wanted to make sure on. Actually I wanted to just add a footnote on the court case that I won on 27th July, 2022. I wanted to get the date so that the information is precise. So, I want to confirm to Hon. Biti and Hon. Gonese that I won that case. I cannot be curtailed from implementing policy and each time we have to consult elsewhere.
Let me come back to Clause 6, on the issue of the rates, I want to maintain the 4% on the USD portion, as I said, the reasons were to make sure that we create a level playing field between our domestic currency and the USD being a foreign currency as well as to deal with speculative activities. Hon. Members, I have compromised and conceded on the threshold. We have made progress. So Mr. Chairman, let us approve this then I request that we report progress and adjourn and continue tomorrow.
Those who want food, I am now organising, I found a way. We will give everyone food but it will be a takeaway because we could not organise the kitchen on time. So we are working on it, ngatifambei. Tinotenda.
Amendment to Clause 6 put and agreed to.
Clause 6, as amended, put and agreed to.
Committee of Supply to resume: Thursday, 1st September, 2022.
On the motion of THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE), the House adjourned at Twenty-Nine Minutes past Seven o’clock p.m.