Monday, June 03, 2013

(HERALD ZW) Proposed tax law criticised
Wednesday, 29 May 2013 00:00
Golden Sibanda and Zvamaida Murwira

STAKEHOLDERS have called for a review of Finance Minister Tendai Biti’s new Income Tax Bill to avoid undue complications amid concerns the exercise is being rushed. Analysts and tax experts attacked certain provisions of the Bill, which is based on a residence-based taxation model, saying it should be modified extensively before it becomes law.

These include how definition of residence, how the law will affect the Diaspora, the nature of the tax rates, motor benefits tax, treatment of allowable expenses, taxation of company cars and taxation of employees’ subsistence allowances.

Questions have also been raised on a proposal to tax staff meals based on the cost to the employer and need for a tax dispute resolution mechanism before migration to the model.

While the Confederation of Zimbabwe Industries and the Institute of Chartered Accountants welcomed the proposed law as being in line with international standards, they have made extensive suggestions to ensure it is “perfect”.

Fears are that while reforms are mainly expected to increase inflows into Government coffers, flaws in the proposed law may actually result in many taxpayers evading tax obligations.

The Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion was told that the proposed Income Tax Bill did not provide incentives for tax compliance. Instead, they said, the proposed law sought to penalise those who defaulted even in circumstances beyond their control.

Harare businessman and tax expert Mr Dieter Balzer pointed this out during a public hearing convened by the committee, chaired by Makoni West MP Mr Webber Chinyadza, to hear people’s views on the proposed Bill, now before Parliament. Minister Biti is steering the Bill but information on the public hearings set for Mutare, Masvingo, Bulawayo and Gweru was only communicated on Sunday, giving stakeholders little time to prepare.

“We need tax credits. It should be extended from health to education. Zimbabwe prides itself as having some of the most educated people. So there is need for tax benefits,” said Mr Balzer.

He said it was unfortunate that the Bill sought to penalise people who might fail to pay tax in one instance but might have previously been consistently and religiously paying their dues. Mr Balzer said the Bill provided that one could only claim tax credit on motor vehicles worth US$10 000, yet a good car today costs more.

“This provision only encourages people to buy second-hand vehicles because it is only that vehicle you can buy with that money. A good car costs at least US$20 000 and Government is on record as discouraging the buying of second-hand vehicles,” he said.

Other tax experts said a number of businesses were relying on borrowed capital, hence the need to relax some of the provisions in the Income Tax Bill, if local companies were to survive.

A Harare taxation expert, speaking on condition of anonymity, said it seemed the process to come up with a new taxation law was being rushed as the country did not as yet have the capacity to monitor tax compliance under the new model.

“We haven’t got the legal system to be able to monitor it or keep it on a level basis, so it is going to be a problem. It is new, untested without legal back-up,” said the Harare analyst.

Sierra Leone, one of the countries that adopted the worldwide taxation model, has amended the law thrice in the last three years.

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