Last Word
Complaints over the new tax systems introduced in the budget are flowing in, but are all likely to be overcome.
Some people obviously do not like paying taxes, as if this is voluntary. Some complain that the fast foods tax is so low it provides little return for a lot of work, although the income should be around US$2 million. Some even attack the decision to collect the taxes churches should have been paying for years on their commercial operations, which are not covered by freedom of religion.
No one likes paying taxes, which is why payment is not voluntary anywhere in the world; you pay or are fined, bankrupted or sent to jail.
In Zimbabwe we are a proper democracy, so Parliament has to approve both the taxes and the rates of these taxes, and has to approve the incredibly detailed spending plans of the Government when it comes to using those taxes. Admittedly the Government needs a majority in Parliament to push through its tax and spend plans, but that is the practical definition of a Government, one that can assemble majorities at least for votes of confidence and supply, if nothing else.
Zimbabwe’s tax laws are very clear and considerably more concise than those in say the USA, and do not allow much in the way of zero payment once you are earning some sort of income. There is a zero percent tax bracket, for the first US$100 or equivalent a month, but anyone earning more than US$1 200 a year or its equivalent has to pay taxes.
But in recent decades a lot of people who should be paying have not been paying. When the informal sector consisted of just some hawkers and vendors, with those Domboshava people selling tomatoes from a box strapped to a bicycle being a significant group, or were day labourers, no one really went after the informal sector. It was assumed that those there were in the tax-free bracket.
However, that is no longer the case and a lot of people who should be paying taxes are not paying, and often when they are accosted they claim their operations are too small, and when asked to prove this say that accounts are too complex and in any case they are so small that they just keep everything in their head.
So we know have many tens of thousands who are hiding behind the pavement vendors and the day labourers and pretending they are also very poor. We can understand why they might do this, but they cannot complain if the Government and Zimra, cheered on by those who are paying taxes, go after them and make them pay some share.
We are seeing people who have been avoiding taxes saying they are not against paying but who do not like what the Government spends taxes on, or complain that the spending process is opaque, which means they have not bothered to download and read the blue book, which goes into the most incredible detail over tables on many hundred pages, and can find out just what the Government is budgeting for stationary in a small provincial office for example.
But dislike of something the Government funds has never been an excuse for not paying taxes. Serious objectors can talk to their MP, who does have a vote on this, and even find a new MP at the next election, but that is it.
Minister of Finance, Economic Development and Investment Promotion Mthuli Ncube has recommended measures that enforce a lot more tax paying and account keeping. Tuckshops, for example, if they do not register for tax and maintain minimum level accounts are assumed to be making a profit of US$10 000 a month
Any business of that size will already be registered, and be paying VAT, but the huge presumptive tax of US$3 000 a month was chosen simply because it was far larger than almost any tuckshop would have to pay if registered. This means the tuckshops must register to pay the far small sums they are supposed to be paying, and that involves the keeping of proper accounts so Zimra can check the numbers.
The objective is formalise the informal sector, and make the businesses there pay taxes and buy the necessary licences. The budget created an alternative to registration that was far worse, so providing positive pressure to simply follow the law and sign on.
There could be some concessions for small businesses, besides the one of non-payment of VAT on the last bit of value added, if these can be negotiated and enforced, but the idea some people should not pay tax does not attract a lot of support.
Generally most people want to see taxation erected on a very broad base with almost everyone chipping in even if with not very much.
Many small informal business people operate as sole traders, so they benefit from the zero percent tax bracket and the 20 percent. Even when it works out cheaper to pay the 30 percent company tax on profits and plus the 15 percent dividend tax, a small business person will probably keep paying themselves a modest salary to gain the benefit of the low tax rates before moving into dividend income.
There does not appear to be much support for those informal traders who are now complaining about having to pay taxes. Those in formal employment, including the civil service, and the regularised businesses have been carrying the load almost unaided and will welcome with open arms the addition of the middle and upper ranks of the informal sector to help out.
Some of the new taxes of Prof Ncube have come in for complaint, such as his small tax of 0,5 percent on a range of unhealthy takeaways. People point out the tax is trivial, six cents on a US$12 pizza, although it will be even lower since the US$12 includes sales tax and you cannot tax a tax. It sounds trivial on each item, half a cent on a US$1 bag of chips perhaps, but it adds up.
The largest contributor of this new tax will almost certainly be takeaway giant Simbisa, but with sales of over US$200 million a year, Zimra can expect US$1 million from this company with the new tax, a useful sum. It might be slightly less as the outlets do see some items not subject to the new tax, such as bread rolls and salads, but still those cents add up. The rest of the industry should at manage at least another US$1 million, although collection from some tiny one-person takeaways might be hard to collect.
We suspect that with the pricing in much of this sector based on whole-number US dollar prices, converted where necessary, that the sector will have to absorb the tiny extra cost. In any case the time for discussion is rapidly coming to an end and Zimra has warned takeaways that from January they need to have an accounting system that incorporates this new tax and that receipts show customers how much they are paying in the new tax, as well as in VAT and for the actual product.
Another area where Zimra has been trying before is over church funds and pastor incomes. Churches do get a tax break, since they do not pay tax on collections, contributions, gifts and tithes and this sort of income from their congregants, who presumably have paid tax on the incomes that generate this income. They also get this exemption on interest payments and other income derived from saving some of these funds. But that is it.
Churches do need to pay tax on commercial operations, including selling pamphlets and bibles or special uniforms for the like. Bishops, priests, ministers, pastors and other church workers also have to have PAYE deducted on their stipends or salaries or other regular payments and make tax returns if their income is not fixed. Established churches have for more than a century maintained separate accounts for church work and for any repository or shop, and have registered charitable work as a voluntary organisation with separate accounts and followed the PVO laws to benefit from tax concessions there.
But Zimra is now reminding churches what the law states, and has stated for more than a century, and made it clear that commercial operations are taxes as commercial operations, not church services, Some churches have been used to cover commercial operations, or at least been used to crate fictitious tax exemptions.
The last major attempt to get church people to pay taxes brought up accusations of anti-church work, but church operations are just about the only thing churches do that is not taxed or regulated. It is the rest of the church activity, the money making part, that is taxed and those working for a church, and getting an income, have to pay income tax on that income.
