'Our current Income Tax Act is very much in favour of the mining industry,' says Biti

GOVERNMENT wants to rationalise the tax regime so that it is not discriminatory against the poor and treat everyone fairly, a Cabinet minister has said.

Finance Minister Tendai Biti said the current tax structure tended to protect big businesses while punishing the poor through high tax bands.

He said the Income Tax Bill, which went through its Second Reading Stage in Parliament on Tuesday, sought to address the inequities.

"The other  principle of a good income tax law is that it must be equitable in the sense that it must treat all taxpayers equally or equitably.  Now, our current Income Tax Act is very much in favour of capital and big business in particular, very much in favour of the mining industry," said Minister Biti in the House of Assembly on Tuesday.

"So, just to give you an example, for an individual like you and me, the upper rate of tax is between 35 and 42 percent.  In fact, that is the effective rate.  In other words, there is no difference between the nominal rate and the effective rate but if you look at the mining sector, the nominal tax rate is 25 percent, but the effective tax rate is 8 percent because there is a huge category of tax expenditure - this allowance, this deduction and this rebate. So, the current Income Tax Act is not equitable and we are trying to do that."

He said the proposed tax regime would increase the tax base and plug loopholes where people would avoid paying tax.

Minister Biti said the proposed legislation provides for a residence-based tax system, whereby the taxable income of a taxpayer resident in Zimbabwe is the taxpayer's income from all geographical sources.

"This is a revolutionary thing, comrades and friends. It is best practice. You are trying to deal with the many shenanigans where, and I will not mention companies by name but they are there in the banking sector.  They are notorious in the mining sector, some are even bigger than Mbada, where taxes are manipulated purely on the basis of source and we are dealing here with the issue of residents, the effective control," he said.

On the Securities Amendment Bill, Minister Biti said Government will establish an Investment Protection Fund to protect shareholders who buy equity on companies listed on the Zimbabwe Stock Exchange.

"There are many companies that are listed on the stock exchange which due to our difficulties are actually collapsing. Yesterday, (Monday) we were reading the story of a company, Gulliver, whose assets were sold.  So anyone who is a shareholder in that company stands to suffer if the company gets defaced," he said.

The Securities Commission, he said, would be given sweeping powers to deal with inter-sectoral challenges arising from a listed company notwithstanding its links with other regulatory authorities like banks and insurance.

An example that came to mind was Rennaisance Merchant Bank owned by Rennaisance Holdings with shares in Afre, an insurance company, that also had a stake in Rainbow Tourism Group which owns the Rainbow Towers Hotel.

"So when there is a collapse at the bank, it had collateral and multiple effect on all the other sectors like the banking sector, the insurance sector and the Zimbabwe Stock Exchange," he said.