HARARE (NewZWire) – Finance Minister Mthuli Ncube is imposing new tax measures – including on betting winnings and fast food – in a national budget that shows the depth of the government’s fiscal crisis.
Mthuli is also proposing a sweeping campaign to squeeze taxes from the informal market, targeting everyone from clothing boutiques to car dealers. He has also proposed a government freeze on the recruitment of new staff, while withdrawing tax incentives that have previously been used to attract investors.
Here are some key highlights: Going after the informal market
If you run a clothing boutique, a grocery or car dealer, Mthuli has plans for you. Small companies in the informal sector will now be forced to register for Corporate and Income tax. Previously, the government was content to have them pay presumptive taxes. Sectors targeted include clothing retailers and boutiques, spare parts dealers, car dealers, grocers, hardware shops, and lodges. They must register with ZIMRA, and transact through Point-of-Sale machines, maintaining records.
What happens if you don’t comply? ZIMRA is being given the power to shut down operations.
“I, further, propose to empower ZIMRA to temporarily close businesses which fail to adhere to the above requirements, including failure to register for tax purposes, until such registration and payment of applicable taxes are completed,” Mthuli says.
Traders face huge fines for not complying.
No company or individual can get a bank loan of over US$20,000 without registering for Corporate Income Tax. No mining company can apply for mining rights without registration for Personal and Corporate Income Tax. There’s also a new 20% tax on the plastic grocery bags.
Luv Dat chicken? Mthuli is taxing it
Your favourite chicken and chips is about to get more expensive. Mthuli just slapped a new tax on the menu. There will now be a 0.5% tax on sales for everything from burgers to chicken, chips, pizza and doughnuts.
He blames fast food for “obesity and associated non-communicable diseases”. The tax, he says, needed to “promote responsible consumption of such foods”.
Betting on taxes
Bad news for you betters. Currently, betting shops are charged a 3% tax on gross takings from betters. Betters did not pay tax on their winnings. This has now changed. You will now pay a 10% Withholding Tax on gross winnings. This includes both in-house and online betting provided by local betting houses.
Rental tax
If you convert your residential property to a commercial one, you must now pay a Rental Income Tax of 25%. If your company is using rented premises, you must tell ZIMRA how much rent you pay, plus the location and owner of the property for purposes of this tax.
Any company that doesn’t declare the owner of the rented property will not be able to claim the rental expense against taxable income. The impact of this measure will be to increase rentals.
Freezing recruitment
Struggling to pay workers, the government plans to freeze recruitment. The money available for salaries in 2025 will be 56.4% of revenue. This breaks government policy to keep salaries under 50% of revenue.
Says Mthuli: “To address this unsustainable position, revenue enhancement measures will be implemented, whilst also limiting the recruitment of additional personnel only to critical sectors such as health and education.”
A cut on tax holidays
The government issued Special Economic Zones to prospective investors, granting them generous tax breaks – including a five-year tax holiday. This has changed. The five-year tax holiday will be replaced by a Corporate Income Tax rate of 15%. The tax exemption on withholding tax is also dropped, replaced by a 10% tax. Companies in areas such as petroleum and mining will no longer qualify for SEZ status, which was an attraction for many investors.
Import and export
Mthuli expects exports to end the year at US$7.4 billion. This is only a small increase from 2023’s US$7.4 billion, the result of lower commodity prices for platinum, a key export earner.
Diaspora remittances up
Zimbabweans abroad sent home US$1.9 billion in the nine months to September, 16.5% more than the same time last year. Diaspora remittances are expected to end the year at US$2.49 billion.
What did he say about the power crisis?
Mthuli admits that there is “significant load shedding that continues to weigh down on growth potential and competitiveness of the economy”.
His solutions? There are no immediate relief measures. Mthuli says he is increasing the budget for energy projects, “to facilitate investment in power generation, transmission and distribution network”. Projects include the refurbishment of Hwange’s Unit 5 next year, plus new projects in the mining sector which will ease pressure on the grid.
Ncube says the Government Implementation Agreements given to power producers should get projects worth 1500MW off the ground by 2026. Next year, government plans to build 100 mini-solar grids, with funding from China.
To encourage independent power producers, Mthuli is extending VAT deferment on capital equipment imported by companies in the energy sector. To reduce the cost of gas, he is exempting LPG from VAT.
Customs duty on Electric Vehicles has been cut from 40% to 25%, while there is a rebate on duty for companies setting up charging stations.
Newzwire
