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SENATE HANSARD 08 FEBRUARY 2017 26-26
PARLIAMENT OF ZIMBABWE
Wednesday, 8th February, 2017
The Senate met at Half-past Two o’clock p.m.
(THE HON. PRESIDENT OF THE SENATE in the Chair)
ANNOUNCEMENT BY THE HON. PRESIDENT OF THE
BILL RECEIVED FROM THE NATIONAL ASSEMBLY THE HON. PRESIDENT OF THE SENATE: I have to inform
the House that I have received the Appropriation Bill [H.B. 14A, 2017] from the National Assembly.
FINANCE BILL [HB 3, 2017]
First Order read: Second Reading: Finance Bill [H.B. 3, 2017]
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Madam President, it is my
singular honour to present and to move the Second Reading of the
Finance Bill [H.B. 12, 2017]. The purpose of the Bill Madam President, is to give effect to the revenue measures which were announced in the 2017 National Budget Statement which I presented to the august House on the 8th of December, 2016. The measures seek to achieve the following:-
- They seek to promote foreign direct investment;
- To provide tax relief to tax payers particularly small and medium enterprises and players in the informal sector;
- They seek to enhance revenue collection through enactment of anti-avoidance measures and widespread use of information technology in tax administration;
- The measures also seek to mobilise additional revenue to fund critical sectors of the economy and also to promote efficiency in tax administration and;
- Lastly, the measures seek to strengthen initiatives towards promoting good corporate governance.
Madam President, in order to attract foreign direct investment and enhance the economy’s capacity to competitively produce goods and services, Government enacted the Special Economic Zones legislation. I have thus proposed the following tax incentives for investors into
Special Economic Zones:-
- I am giving exemption from corporate income tax for the first five years of operation and 15% thereafter. I am granting a special initial allowance on capital equipment to be allowed at the rate of 50% of cost from year one and 25% in the subsequent two years.
- I am granting a flat 15% personal income tax for specialised expatriate staff.
- I am also giving exemption from non-residence tax on fees payable in respect of any services of a technical, managerial, administrative or consultative nature.
- I am also granting exemption from non-residence tax on royalties’ payable as consideration for the use of/or the right to use patents, trademarks, secret formula or processes among others.
- I am also granting exemption from non-residence tax on dividends.
Madam Speaker, small to medium enterprises play a critical role in the economy hence account for significant portion of the gross domestic product and employment creation.
Initiatives by SME’s have thus greatly assisted in poverty alleviation, eradication and economic empowerment. In order to further enhance the growth of SME’s, I am proposing the following support measures:-
- I am waving the requirement for SME’s to account for output tax from the deemed date of qualification for registration, that is when gross turnover exceeds, the threshold of US$60 000 per annum. This measure will apply to SME’s whose turnover does not exceed US$240 000 per annum and also voluntarily register for VAT with Zimbabwe Revenue Authority.
- Eligible SME’s will thus account for VAT from the date of registration. Also one of the support measures is the option to account for provisional tax on a monthly basis.
- The informal sector largely views taxes as an additional cost to business. In order to encourage voluntary compliance within the sector; I am proposing to review downwards all presumptive taxes and the payment period from quarterly to monthly basis.
Madam Speaker, in order to provide relief to tax payers of various classes, I further propose the following amendments to the Income Tax Act, Value Added Tax Act and the Capital Gains Tax Act.
- I grant VAT exemption for banking and payment solutions offered by institutions registered under the National Payment Systems Act which are assisting in resolving some of the payment challenges arising from the current cash shortages.
- I am granting exemption of board fees accruing to nonexecutive directors from non-residence tax on fees.
- I am granting exemption of Government from debt redemption and strategic reserve levies.
- I am granting reduction of the debt redemption levy on petrol by 1% per litre.
- I am extending deferment of export tax on un-beneficiated platinum to 1st January, 2018.
- I am also giving and allowing elimination of double taxation for informal traders who are currently required to pay presumptive taxes and in some instances, informal traders tax.
- I am also granting reduction in rates for carbon tax charged on foreign registered motor vehicles to a uniform rate of 10% per annum.
- Further, I am granting tax exemption for the Zimbabwe Asset
Management Company, that is ZMCO with effect from 15th July 2014, instead of 1st January, 2016.
- I am also granting income tax exemption on proceeds of the 5% export incentive paid by the Reserve Bank of Zimbabwe on receipts of earnings by exporters and on remittances from abroad received by individuals in Zimbabwe which are channeled through dealers.
- I am granting capital tax exemption on donation of housing units to any local authority, employee, share ownership scheme or community development trust and I am granting capital gains trust on these schemes.
- Lastly, I am zero rating gold sales to Fidelity Printers and Refineries with effect, retrospective from 1st January 2014, this measure will be effected through subsidiary legislation.
Madam Speaker, in order to raise additional revenues to fund critical Government programmes, I am proposing the following measures:-
- Introduction of a health fund levy of 5 cents for every dollar of airtime and mobile data under the theme “talk safe and save a life”. This will promote access to comprehensive and effective health services for all citizens. The resources raised will be ring-fenced for the purchase of drugs and equipment for public hospitals and clinics.
I will be granting an extension of the limit on tax deductable expenditure which is currently restricted to transactions between the parent company and its subsidiary or branch to apply to transactions between associated companies. This will minimise base erosion and opportunities for profit shifting to lower tax jurisdictions. I am also granting introduction of the concept or permanent establishment which is necessary in establishing the right for Zimbabwe to tax the profits of a foreign country.
Also to be included is exclusion deemed dividends arising from disallowed interest expenses exceeding the date to equity ratio threshold of three to one from the current income tax exemption.
I will be also expanding the definition of specialised assets for purposes of levying capital gains tax to include income accruing from the disposal of prescribed property of any description, whether tangible or intangible including whatever nature of rights to such property.
I am also seeking the introduction of VAT withholding tax at two thirds of the output tax payable by specified VAT registered operator designated by the Commissioner-General of ZIMRA.
Madam Speaker, the proposals in this Bill will be complimented by the following measures aimed at improving administrative efficiency and minimising tax fraud.
I am providing for the payment of dividend tax arising from disallowed interest in terms of the self assessment provisions. Currently, the tax is payable upon notification by the Commissioner-General of ZIMRA.
Secondly, the $30.00 daily penalty per machine for failure to connect acquired fiscalised devices to ZIMRA server for purposes transmitting real time data of vettabale transactions.
Lastly, to empower the Commissioner-General of ZIMRA to report any unethical conduct by tax payer or a tax practitioner to a recognised controlling board or association that regulates their conduct.
Madam Speaker, the current monetary amounts for level one to three of the standard scale of fines are no longer deterrent enough to errant behaviour particularly on our roads. As a result,most of the carnage that is witnessed on the country’s roads is a result of human error arising from failure to observe road traffic regulations. I am therefore, proposing to review upwards monetary amounts for levels one to three on the standard scale of fines. I now move that the Finance Bill be now read a second time.
HON. SEN. MARAVA: Thank you Madam President of the
Senate. I listened carefully when the Minister was talking and I have found out that this Bill is not only going to help the GDP of the country but it is also going to help in plugging the loopholes or leakages of the national income. I think this thing was long overdue and it is also one way through which the nation is going to reclaim whatever would have been taken from it or from its coffers unnecessarily, through dirty hands and corrupt tendencies. I think it is a very good Bill, I thank you.
HON. SEN. MUSAKA: I thank you Madam President. I wish to
really thank the Minister and congratulate him. This Bill is progressive and humanitarian. A lot of its aspects really are people focused, especially on health. I think we should also go to defence, all the essentials - I think it should also go to education. We should be able to pay, companies should be able to pay for the health of this nation. This is I think to me commendable this is most important that really the health sector has become very shameful.
If you are near Botswana, you go to Botswana for health services, because we do not have drugs in our hospitals. If you are near Zambia, you go to Zambia. Now, this move really to tax the very wealthy, luxury and bringing the funds, it is really commendable. I should think we should also add defence, because there is no soldier who can be told to go and start working for his own food, to carry it to go to war. I think defence should also be covered. The Minister covers it somewhere, but I am just trying to highlight the positive aspect of this Bill. It really deserves support I thank you. – [HON. SENATORS: Hear, hear.]-
HON. SEN. CHIMHINI: Thank you Madam President. While I
support the Bill that has been brought to this House, I want to encourage the Minister to ensure that we do not have policy inconsistencies. One thing he has mentioned is the question of FDI. We can only get FDI when there is confidence building. So, I want to believe that in Cabinet we will be singing from the same hymn book so that the effort the
Minister is putting is also complemented by what other Ministers say.
For us to get any assistance from outside in FDI is only when there is confidence in the country. So I really want to believe and ask the Cabinet to make sure that we support the Minister for us to deal with the FDI issue.
The second issue is that Minister, you have talked about 3 million businesses in the SMEs. I am not too sure whether Minister you are aware how difficult it is for people to register online. I have experienced problems where people who have small businesses would want to pay licences to the local authorities and they have been told that they can only do that when they have the tax clearance. They are asked to get the tax clearance through online registration to get the certificate. We are talking of an old man and woman running a bottle store out in Mahenye and they have to do that online on the internet. It is very difficult, in most cases people have failed to gain access because the system jammed throughout and they have been asked to do that during the night.
In other words, we are losing revenue because people decide not to register because it is cumbersome to do the registration online. The third issue Minister, through Madam President, is that the Minister talked about supporting women programmes. The question of women’s bank, I hope this is not only on paper. Let us get the money, whether it is $3 million or whatever, let us get that money deposited in some account, ring-fenced so that the women can access that money. That is one way to empower women –[HON. SENATORS: Hear, hear.]-
If we continue talking about it year in year out I think this will be just paper money or records that do not reflect what is on the ground and what the Minister wants to make sure that we change, improve and the economy grows. I thank you Madam President. – [HON. SENATORS:
HON. SEN. MOHADI: Thank you Madam President. I would
also want to add my voice on the motion that has been presented by the Minister. It is a welcome Bill because if you mention anything that supports women, as a woman I am very happy. I would like to see that happening practically as a practical person. The Minister when he presented his motion talked about supporting the cotton industry. Unfortunately, when the debate was done, I was not there. I do not know whether he has something which also supports the farmers who deal
with citrus, whether there is anything for the exportation of these citrus fruits and how he is going to assist them. Also, I would like to know - there are problems in importing agricultural inputs, especially the fertilizers that are not within the country; whether there is a lee way that he has put in place on how we can get these inputs. – [HON.
SENATORS: Hear, hear.]-
HON. SEN. CHIPANGA: Than you Madam President. I rise to
congratulate the Minister for particularly addressing the issue of Special Economic Zones the issue of Economic Zones Madam President it has been on cards for all I can remember, for almost 20 years now. It has been like the Government was hesitant to implement the program. The most important thing that I want to congratulate the Minister about is for the first time and I believe for the first time, the Minister has decided to do what they call biting the bullet. For all the years the Government has been hesitant to offer tax reliefs to those who want to invest their monies in this country. The approach has been in my view if you do not tax them then the Government will not get money. I think we have got to a point where we are saying if the Government can not get taxes from these investors at least for the next five years, then thereafter we will then get more. I think that is the best route. Not only will it encourage the growth of our economy, but that will also create more jobs in this country.
The issue of taxing the informal traders has been a vexing issue, but it looks the Minister has come around and has now found a way of insuring that whilst the informal traders are taxed - they are not double taxed. The problem has been that they buy from Mahomed Mussa, they are taxed and then they go to sell then they are taxed. Can a way be found that they are taxed at one point because that will also encourage them not to dodge taxes because they know that they are doing the right thing. Madam President, the rest has been said, except to add what has been said before that issue of consistency, once the Government decides we want to go this way or the Minister has said this is the route to go. We would want to see that thing done. It is pointless for us to sit here and support him and only to be told that that idea has now been reversed.
I thank you.
HON. SEN. CHIEF CHARUMBIRA: Thank you Madam
President. I would like to thank the Minister and support the Bill, but also to say that we welcome the exemption from capital gains tax on donations made by companies and houses as you put it. In future, can you extend such donations to schools that are destroyed? We find companies are donating to various infrastructural projects like schools that are destroyed by wind or by rain. Could you extend these to such donations? Thank you.
HON. SEN. CHIEF NGUNGUBANE: Thank you Madam
President for offering me this opportunity. First and foremost, I would want to commend the Minister of Finance for coming up with this Bill. It is one of those challenging jobs in our Cabinet today. I want to commend the Minister for coming up with this Bill. Most of the points have been raised by colleague Senators, so I will not repeat them. I would want to comment on the health fund levy as found in Section 31
of this Bill.
There have been cries that the people of Zimbabwe are over taxed and indeed, they are. In saying that, I would want to commend the Ministry. As Government, there are critical sectors that we should take responsibility. I know that taxing people is not the right thing, the sentiments are not good but I would want to thank the Minister that Government should prioritise allocating money to important sectors like health, other than to rely on donors to fund our health sector. It would be disastrous when they decide and it fits in into the theme of last year’s budget, ‘growing the national cake’. How do we grow the cake? One of the ways is domestic resourcing.
I would want to compliment the Minister for a job well-done. As a person who sits in the HIV/AIDS Committee, I feel that you have done very well. I feel I should commend you for a job well-done. My second point Minister is you have also said you have deferred the effective days of tax on exportation of unbeneficiated platinum. While this is a noble idea, I think it is important that we should come up with a cut off time that we should process our own resources locally. If we delay, we are keeping those people, especially South Africa because the platinum goes in its raw form and it is further processed. People in South Africa are getting jobs of a resource that is found within our borders.
I think as a matter of urgency, we should assist mining companies to set their own smelting plants so that we are able to extract because platinum is not the only mineral. There are several resources that we could benefit from. With those few words Madam President, I would want to thank the Minister for the Bill that he has just presented. Thank you.
*HON. SEN. CHIEF MUSARURWA: Thank you Madam
President. I would also want to thank the Minister who has presented this Bill. I will focus on banks regarding ZAMCO because banks are finding it difficult because our economy is in the doldrums. We thank you for the effort you are putting in growing this economy. My plea is that let us not encourage the establishment of small banks so that when they borrow this money, it is passed on to the Government. You have told this august Senate that you have adopted the credits and accounts owned by these companies. What we want is to avoid these organisations being ghost houses because if it goes like that, these companies will not be able to pay back the money they will have borrowed. I thank you.
+HON. SEN. CHIEF GAMPU: Thank you Madam President. I
would like to add a few things concerning this Bill which has been brought by the Minister of Finance. I have heard that in his presentation, he said that the Ministry of Health and Child Care would be assisted a lot. We appreciate that. It will be very good that in the Health Ministry where he is going to assist, he needs to remember that there are people who are affected by diabetes. Those are the only people who are not able to get their medication for free.
However, that is a disease that is very rampant and it is affecting more people than any other disease. There are so many people who are affected by diabetes and most of these people are not employed. They are not able to access medication as insulin and the other medication is expensive. We are therefore appealing to the Government to assist the people who are living with diabetes so that they are able to get medication for free like those who are HIV positive who get their medication for free. As a Member of Parliament, I would like to say that the people are pleading with the Government to consider those who are living with diabetes. I thank you.
*THE HON. PRESIDENT OF THE SENATE: We also thank
you Hon. Sen. Chief Gampu.
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): Thank you Madam
President. I want to thank all Hon. Senators who have made contributions and also for their support. I am gratified that all those who have contributed are supporting the direction that we are now travelling.
I expect that I will continue to receive that support in the future. Hon. Sen.tttrr Marava, you started with the issues on the measures that we are taking to plug leakages. We believe that we can generate more revenues from the economic activities as they are more than we are doing.
I also believe that the system had been corrupted. So, it is the resolve of my Ministry to close all those loopholes so that we can enhance revenue collection. Some of the measures that we have insisted ZIMRA should undertake include cargo tracking. We have had instances where these haulers declare at Beitbridge that they are destined for DRC, Zambia and so on and as soon as they pass the border, they offload goods which have not paid duty on to the domestic market. This is mainly rampant in the area of fuel. So, for this reason, with the assistance of the African Development Bank, we now are piloting a tracking system which tracks the journey travelled by any truck and it puts seals on to the vehicle from Beitbridge until it gets to Chirundu or whichever exit border post.
We have had some challenges recently and I think it proved that the tracking system is working. We had an incident where fuel that was declared to be destined for DRC, I think, was offloaded here and then replaced with water. So, those are issues that we need to keep an eye on and we will certainly make sure that all the culprits are brought to book. You can see one of the sources of our revenue, especially customs duty, is fuel. So, if there is that kind of leakage obviously, it means a big hole in our revenue collection.
Another system that we have also introduced is CCTV, mostly starting with Beitbridge Border Post which is the busiest in Sub-Sahara. It handles a lot of traffic, more than any border post in Sub-Sahara. So, clearly the administration within the border post itself, leaves a lot to be desired. There are a lot of touts who ply their trade there who have no business to be inside the building except to lobby or to bribe those officers who are given the task to move traffic and to charge taxes. So generally, there is no direct contact between the briber and the officials. It is done through those touts who mill around the border post. So, we are setting up a system, basically to exclude anybody who has no business to be inside not to be inside. So, those are some of the measures that we are taking.
I have also mentioned, I think earlier, in my main speech that we want to connect all taxpayers. Their teams must be connected real time to ZIMRA so that as transactions are undertaken, we know what has been collected by the tax payer. Generally, you will find they collect VAT on behalf of ZIMRA and it is not remitted, they collect Pay As You Earn and it is not remitted to ZIMRA. They collect all sorts of taxes which is not their money. They basically use that money for themselves. So, we want again, to eliminate that situation. So, you are right, I should never remain in the position that I find myself in where above 90% of the revenues are going to wages. We need to correct it.
We need to correct that structure of our budget and we are pursuing two routes.
The one basically, is to undertake and implement rationalisation measures within the civil service. That is a process and not an event. It will take time. My hope is that we can, by 2019, have reduced the wage expenditure as a proportion of revenue from the current 90% and above to about 55% or 50%. That will give me room, fiscal space to spend on operation and also to spend on capital formation. And this is where we can create real jobs, improving service delivery, doing our roads and doing our irrigation schemes. That is where the real production will come from, not just paying people and we have no money for them to pay for operations.
So, the other route is to grow the cake which is why the main thrust of the Budget in 2017 is to focus on production. Unless we have production, we have no economy and it causes a lot of complication. I am happy to say, Madam President, that this year we gave maximum focus on agriculture through the initiatives on command agriculture, through the initiatives of the Presidential Scheme, through the initiatives of the support to the cotton sector. So far, the heavens have smiled on us. If the rain pattern is maintained, I am expecting growth from agriculture more than I projected in the 2017 National Budget because we were working on assumptions. So, I am expecting more production from that sector, which as you know, is the anchor to all our economy. It will in turn drive our manufacturing and our industry. So, the prospects are very good.
I am also expecting and I think we have been growing gold production and it is coming on stream. Last year, we were falling short of the target buy one metric tonne, but certainly the trend is in the right direction. This year, I am expecting a bigger output from cotton. So, right across the board, as we go into next season, we are going to carry the command agriculture into wheat production. We are also in
2018/2019; going to increase the support we give to the Presidential Scheme. We are also going to include other crops like soya beans on to the Command Agriculture structure. This is to address the sector of agriculture which will in turn basically, affect other sectors in the economy.
Senator Musaka, thank you very much for your support. You mention something about the Defence budget. I am sorry it is not what it should be. All we are doing, and hardly well, is to look after the wages. An army must have equipment and we do not have those resources, which is very bad. An army can actually be even smaller as long as it has more sophisticated equipment and is mobile both in the air and on the ground. That is what makes an army an efficient army and we are not doing well there, I must admit, but it is not intentional. It is an issue that we try to be as creative as we can to mobilise resources sometimes outside the budget.
The health sector, I think I have already mentioned the efforts that we are making. I am going to be monitoring the inflows from the Health levy and especially its application. I had some disappointment with respect to 2014 or 2015; we made resources available to Parirenyatwa and Mpilo Hospitals to purchase certain equipment. At Parirenyatwa Hospital, it was installed almost within six months. At Mpilo Hospital, we had to make noises last year. It had not been done. Now, that is an investment that is like going to waste.
They have now started running around and when you ask why there was that delay, the answers you get are not satisfactory because we gave the two institutions equal resources for the equipment and also for the installation of the equipment. In one case, it happened and in the other, the equipment was just sitting, remaining in its crates and so on.
So, it then means we needed also to address the issue of management.
Clearly, there should have been a problem of management.
Hon. Chimhini, thank you for the support. The issue you mention about policy inconsistency. There are none now but where they are, personally I understand them. When we have a new or unique situation like we have and you are coming up with new policies, you need to carry everybody along with you and sometimes you are not on the same page. This is only helped by more consultations, debate and more inconsistencies which eventually will get you to a position where consensus has been established. So, I am not worried about disagreements, whether in private or public. They help basically consolidate and clarify a lot of things that we are doing, more-so when we are seeking in terms of a policy to do a U-turn. People are more comfortable with status quo. They do not like change that much. Clearly at the moment, we have a very good environment which is conducive for foreign direct investment except the stigma of sanctions; the negative impact of sanctions. That is what is now standing between us and entering the global economy. We should develop more confidence about ourselves. We should speak less negatively about our country. I am not saying our country is perfect. No country is perfect but even within the family, we are not perfect households. The expectation is that whatever problems you have in your household, keep them to your household. Do not come out in the street and shout about them. The street will not help you to resolve them. Similarly, with respect to any challenges that we may face as Zimbabweans internally, let us not go out of the country to bad-mouth our country, administration, Opposition or Government, that is internal.
My disappointment on this was with our debt arrears clearance with the multi-lateral institution, to find Zimbabweans tracking the Governor and I. They tracked us wherever we went to engage for resolution of this issue and then after we left, they would lobby them not to support Zimbabwe. That, I think is very bad. It does not matter who you are. If you are Zimbabwean, that is evil. They would write all sorts of e-mails to the World Bank and Afrexim Bank to say, do not support Zimbabwe. That is very bad because these institutions also have people who may not quite like us. They will now find a basis upon which they can withdraw their support from us. I know countries that have worse problems than ours but when we meet them outside, they never talk badly about their own fellow citizens, President or country. They do it when they are in their own countries. We need to adopt that kind of attitude also in our country.
On the difficulties for obtaining tax clearance certificates, I am advised that ZIMRA has since rectified the system challenges. Tax payers can now easily obtain the tax clearance certificate. If you continue or any of your constituency members continue to encounter problems, please let me know. We need that feed back. We are not in business. We make laws and we do not know how they affect people differently, so we need to be advised what the problems are.
With respect to the Women’s Bank, you need to know that we have capitalised it with US$10 million to start a micro-finance institution. I also need to advise the Senate that I have also capitalised the Youth Bank with US$10 million too. This is out of recognition that when we look at the SME’s sector, the key players are women and youth and not men. We need to increase their access to capital. Again, I have been advising both the Women and Youth Bank promoters that when they lend, they should look at someone who has already taken the first step and not someone who just comes and has never done anything or sold a tomato and so on, and then they give him money but on the say-so of that borrower. They should go out there, look at what people are doing at Siyaso; see those who need that capital to enhance their activities. Those are the people that they should support. Even the Bible says, you must take the first step before God comes to help you. Senator Mohadi, thank you for the support for the Bill. I will take up the issue about what support we can give to citrus fruits. Infact, the support I can tell you straight away is that, if you export your oranges, you are going to earn that 5%. That support is to all exporters. You will be able to earn that 5% but if you have any other incentives in mind that you think we should introduce, please let me know.
On importation of fertilizers, you need to know that we do not charge customs duty on imports of fertilizer and being located in Beitbridge, you are the best conduit through which fertilizers should come to Zimbabwe from South Africa. You are free to import. If you have any problems to import for your business, let me know so that we can facilitate and assist in that regard.
Senator Chipanga, thank you very much for your support for the
Bill and more importantly, for giving focus to the Special Economic Zones legislation that we enacted last year and also for the incentives that we have introduced through the 2017 National Budget. I have actually said in response and when I interact with those who are promoting special economic zones; I am saying, any investor who wants to come into the special economic zones and feels that the incentives that I offered in the 2017 Budget are inadequate, please come and we will talk. The objective here is to get serious investors into the special economic zones. All I am looking for at this stage is technology transfer. I am looking for capital, managerial skills and employment creation for our people. If I get that, make your money. I am also looking for export receipts to enhance foreign currency to the country. If I get that, make your profit and you go. I want to say anyone who is interested to come into SMEs, please let us know if there are any other incentives that you think we should as Government offer.
I have already responded Hon. Sen. Chipanga to the issue about SMEs, especially the registration and also the fact that I reduced the presumptive tax. I need also to point out that I am going to ring-fence revenues that come from presumptive tax to capitalize SEDCO that is the Government parastatal which lends money to SMEs. I want that money to be ring-fenced and it will not come to Treasury. It will go straight to support SEDCO in its capitalisation.
Senator Chief Charumbira, thank you again for your support but I just want to clarify one issue on your submission. You want us to extend the exemptions on donations to cover materials that maybe supported or given to schools and clinics that collapsed through this, it is not the same principle. What I think you want me to do, which I will look into if it is not there already, is to grant tax credits to companies that help to put up classroom blocks, donate library equipment to schools and help to repair schools. That is what I think you are talking about and it is something that we should look at. In fact, we are looking at this in the broader sense because when we talked about employment creation with Minister Zhuwao, especially youth employment, what came out clearly in our discussion was that we need to enhance skills. It is a matter which I have also discussed with my colleague here, Hon. Senator Hungwe. When we are looking at skills, we need to equip our youths with the necessary skills.
Just to give a bit of statistics. I think in any one year, something like 350 000 or thereabout pupils write O’ level and the A’ level, polytechnics and universities will probably account for 100 000, leaving something like 200 000 youths who have had a modicum of education but have no skills to talk about. So, we have been discussing and saying, and I am warming to that idea that we should adopt a policy where we have a vocational training college in each administrative district. That clearly is a tall order. We are talking about building workshops, hostels and a lot of things, so it is quite a mammoth task. So how can we link up the private sector to be able to say to a bank, please put up this vocational training centre in Beitbridge administrative district? We give them the specifications and the land we donate and it is either communal and then we say, what incentive do you want as a private player for doing that. These are some of the discussions and dialogue we should have with the private sector.
Madam President, you can imagine what the quantitative and qualitative leap that this economy can achieve if we do that. Obviously, in each administrative centre or district and vocational centre, we will take account of the local peculiarities of that place. In terms of imparting skills to our people, it will be phenomenal. Those are some of the ideas that we are talking and I am sure they will get support and traction.
Hon. Sen. Chief Ngungubane, thank you very much for the report on the administration of the HIV levy. We have improved efficiencies greatly and I am very pleased with the direction we are taking. For instance, we have now set up a team within the Accountant General’s office to peruse and study all auditors’ reports to see where there are inefficiencies or maladministration. We are now going to be in a position to respond to any of the auditors’ reports which were presented in the past. I think I will be able to do that by end of March and thanks to the team that we have set up. We are also considering installing in each of the ministries, certainly the big ministries, an internal auditor. This is basically to assist in the administration of our finances. We need to have value for every dollar that our taxpayers pay and we do not want abuse and fraud to be rampant within Government. So, we need to take those measures in order to correct that. I agree with you that we do not want to be too dependent on donors especially on key issues like health. I am hoping the health levy will play its part and we will see how it will operate.
The issue that we need to dwell on and talk about is domestic resource mobilisation. We have started that discussion within
Government and the pace is too slow but essentially, we do not have to be poor in this country. I think that is the bottom line given the range of minerals that we have but I want Hon. Senators to understand that yes, the wealth is there but it is underground. Until it is taken out of the ground, we are just as poor as someone who does not have those resources. It is important that we have policies that link up exploitation of those resources to capital and capital has its own demands. We need to be sensitive to those demands.
Again, it is a cost benefit analysis. If we think we are okay without that exploitation, we remain where we are. So, it is a matter of negotiations and being clear ourselves on those policies which promote exploitation of our resources. So, those are issues that we are tackling and obviously, I am disappointed that the diamond sector has not contributed what I had expected when I came in as Minister of Finance – [HON. SENATORS: Hear, hear.] – In my first budget as substantive Minister in 2014, I had projected 13 million carats production. Throughout, I have not gotten anything more than 3 million carats and when you bear in mind that the Chiadzwa diamonds, their DNA structure is that 10% are gem and these are what they would sell at something like $80 and above per carat. Ten to twenty five per cent are near gem, and we are talking around $30 - $50 per carat. The rest, 75% are industrial which is around $8 - $10 per carat. We also need to understand that situation.
So, sometimes we enter into simplistic comparison with Botswana, Namibia or Angola. Botswana is 95% gem and so it is different, but notwithstanding, I should expect more support on the fiscus than I am getting right now. Minister Chidhakwa and I are working feverishly basically to sort out about the issue of resuming production in that area. The challenges were mainly to do with the policy that we took to consolidate and then there was litigation arising from that consolidation. We have now taken steps to engage those companies with a view to see whether we can amicably resolve those issues out of court. I hope that the efforts that we are making will be successful.
The issue raised by Hon. Sen. Chief Ngungubane about value addition and processing our minerals, I think something is already beginning to happen. We have been monitoring the undertakings made by platinum producers; Zimplats, Mimosa and so on. Zimplats has already achieved up to smelting, that is purifying up to 85%. Mimosa and others will follow and by January next year, we should be able to commission something along those lines. They will have progress to report to us. With respect to diamonds, we now have a diamond cutting and polishing that is being undertaken by Aurex - not to the extent of India of course, but clearly it is a very good step that we have taken. State of the art equipment was imported from India and they are now cutting and polishing diamonds as well as translating that cut and polished diamonds into jewellery. I would want to encourage Hon.
Senators when you travel; I think Aurex has got some workshops here. If you want jewellery go to Aurex whether you are looking for gold or diamonds or you want to engage whether you have found a new wife or husband. If you want to engage please visit, you will get it at very good prices.
I also thank Hon. Sen. Chief Musarurwa for the support and we work very hard to ensure that we have no bank failures and currently I can say that the financial services sector is very sound and stable. I am very pleased with the measures that we have taken to stabilise the financial service sectors. We have some challenges to do with what they charge with respect to interest but we are trying to engage them in a market friendly way. Hon. Sen. Chief Gampu, thank you very much for the support and we are also giving support, clearly we are seeking to give support to the health sector.
The point I want to make in this regard is we need to change the structure whereby I am a prisoner of the wage bill at 90% and above going to wages. I get into a situation where we cannot hire new doctors, nurses and teachers. It is not good for the future once we start on that premise where we train teachers and doctors for other countries. You are not taking into account the issue about replacement of those who are retiring. So, this is something that we are working on and I am sure that over time we should be able to overcome these challenges. With this response Madam President of the Senate, I now move that the Finance
Bill be read a second time. I thank you for your attention.
Motion put and agreed to.
Bill read a second time.
Committee stage: With leave forthwith.
FINANCE BILL [H.B. 3, 2017]
House in Committee.
Clauses 1 – 63 put and agreed to.
Bill reported without amendments.
Third Reading: With leave, forthwith.
FINANCE BILL [H.B. 3, 2017]
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): I therefore move, and I
thank Hon. Senators, for their support. I move that the Finance Bill
[H.B. 3, 2017] be now read the third time.
Motion put and agreed to.
Bill read the third time.
CURRENT STATUS OF VAT ON BASIC GOODS
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): Madam President, you will
recall that in the 2017 National Budget, I proposed to introduce VAT at
a standard rate of 15% on products which include rice, margarine, cereals, maheu, potatoes and meat (pork, beef, fish and chicken).
- The basis for standard rating the products is mainly due to the need to rationalize the schedule of zero rated and exempt goods, in order to broaden the tax base and minimize the cost of tax administration.
- Zimbabwe, together with other SADC Member States has ratified the SADC Protocol on Finance and Investment. Under the Protocol, Member States are mandated to harmonise taxation matters and coordinate tax regimes.
- In an endeavor to harmonise taxation matters, the SADC region has developed VAT guidelines which enable Member State to sustain and enhance tax revenues on an equitable and efficient basis.
- Member States have, thus, agreed that the list of zero rated and exempt products should be streamlined, in order to achieve the following objectives:
- Broaden the tax base;
- Enhance revenue generation;
- Promote administrative efficiency;
- Minimize corruption;
- Ensure similarity among Members States; and,
- Enhance equity and fairness, among others.
- Madam President, in the SADC region, Zimbabwe has one of the longest lists of zero rated and exempt products. The list of zero rated and exempt products include, but not limited to the following:
- Grains such as maize and wheat;
- Mealie meal;
- Cooking oil;
- Inputs for manufacture of cooking oil;
- Soya beans;
- Protective clothing;
- Animal feeds and remedies;
- Medical services;
- Selected pharmaceutical products;
- Domestic supply of electricity;
- Domestic supply of water; and,
- Supply of goods such as books, typewriters and maps for use by physically challenged persons; among others.
Mr. President Sir, countries such as Namibia, Lesotho, Malawi and Zambia have a minimum list of zero rated and exempt products. Such countries charge VAT on products such as rice, fresh milk, fruits, eggs and meat products among others.
So, we had imposed VAT to try to reduce our long list of zero rated and exempt products and it was to try to harmonise our taxation matter and also to coordinate our tax regimes. Following the stakeholder representations, concerns have been raised regarding potential informalisation due to perceived price increases, and it is because of those representations that I am proposing to shelve the implementation of SI 20 of 2017 which levies VAT on potatoes, rice, margarine, maheu and meat products.
This is to allow for further consultation with relevant stakeholders. I hope that Hon. Senators will also have an opportunity to give their input into this subject matter and also to carry out comparisons between us and other countries within SADC so that we try to go the route where we try to harmonise our taxation matters and our tax regimes. I thank you Mr. President Sir for the attention.
THE HON. DEPUTY PRESIDENT OF THE SENATE: Hon.
Senators may seek clarifications but we will not debate the Statement.
Thank you Hon. Minister.
HON. SENATOR CHIEF NGUNGUBANE: Thank you Mr.
President. I would want to welcome the move taken by the Minister that he has listened and will make further consultations. I want to seek clarification from the Minister. Minister, as you are aware that this SI 20 was supposed to have taken place on the 1st, and shops and supermarkets had gone ahead to increase the prices of those goods that you have indicated; what action are you going to take to correct that if any? Thank you.
THE MINISTER OF FINANCE AND ECONOMIC
DEVELOPMENT (HON. CHINAMASA): Thank you Hon. Senator
Chief Ngungubane. The clarification that I give is that there is no justification for increases of price. If an item or some goods are on the shelves, the price does not change. You only realise that the price is more when you get to the till. That is when they factor in and charge you the 15% VAT. So, the price should not change but they should change when you buy at the till when they charge you the 15%.
The price will be different from what it was on the shelf at the till. Where retailers have included the 15% VAT in the price on the shelf, it suggests mischief because it means when they get to the till, they charge you an additional 15%. So, if that is what has happened, it will be monitored, and we will make sure that it does not happen because the price on the shelf is their money. When they charge the 15% tax, that is ZIMRA’s money and it should not go into their pocket. The issue that we have been tracking and following is that sometimes retailers charge
15% VAT, but they do not remit to ZIMRA.
That is an offence and it will attract heavy penalties for such a practice. As I pointed out in my earlier discussion, the route we must take is fiscalising transactions by all major tax payers such as supermarkets and so on, so that ZIMRA has real time knowledge of transactions as they are being transacted. I thank you Mr. President Sir.
On the motion of THE MINISTER OF DEFENCE (HON. DR.
SEKERAMAYI), the Senate adjourned at Seventeen Minutes past Four o’clock p.m.