[Bill-Watch] Bill Watch 37/2014 of 30th September [Parliament Passes Mid-Year Budget, Breaks until 28th October]

[Veritas Bill Watch]

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