eBusiness Weekly
BUDGET THEME
“Building a Strong Foundation for Future Prosperity’”
TRANSITIONAL STABILISATION PROGRAMME IMPLEMENTATION PROGRESS
◆ Fiscal and monetary policy successfully shifted to a disciplined and sustainable regime.
◆ The ‘twin-deficit’ was successfully tackled, and 2019 has so far seen consistent fiscal surpluses and a substantial improvement in the current account balance.
◆ The current account, for the first time since 2009, registered a surplus in the first quarter of 2019.
◆ Monthly revenue collections for the first six months amounted to ZWL$5,0 billion, against expenditures of ZWL$4,2 billion.
◆ A cumulative budget surplus of ZWL$803,6 million was therefore realised in the first half of 2019.
◆ Domestic debt declined from ZWL$9,5 to ZWL$8,8 billion — a reduction of 7,4 pc.
◆ Comprehensive currency reforms are being implemented to restore independent monetary policy and to create further scope for enhanced competitiveness of exports and import substitution.
◆ Month-on-month inflation averaged 12,4 pc in the first half of 2019 against 6,4pc recorded in the last half of 2018.
◆ Given substantial headwinds including damages caused by a major drought and Cyclone Idai, the initially projected GDP growth is likely unattainable.
◆ In order to build a track record of sound economic policies, Government has signed off on a Staff Monitored Programme with the International Monetary Fund to run from March 2019 to March 2020.
REVISED FISCAL FRAMEWORK
◆ Total revenues for 2019 are projected at ZWL$14,06 billion comprised of:
◆ Tax revenue amounting ZWL$12,75 billion;
◆ Non-tax revenues of ZWL$1,312 million;
◆ Total expenditures for 2019 are projected at ZWL$18,62 billion comprising of: –
◆ Employment Cost ZWL$5,56 billion;
◆ Capital expenditure ZWL$7,08 billion;
◆ The revised 2019 Budget Framework will result in a reduced budget deficit of 4 pc of GDP
2019 SUPPLEMENTARY BUDGET
The 2019 Supplementary Budget proposes additional provisions and reforms mainly related to the following priority areas:
◆ Stimulation of production, targeting agriculture, industry and other productive sectors;
◆ Food security including;
◆ Grain procurement to mitigate the effect of drought conditions;
◆ Funding for the 2019/20 Summer Cropping Programme
◆ Welfare of civil servants and pensioners;
◆ Social services delivery and social protection;
◆ Infrastructure and utilities;
◆ Constitutional requirements including transfers to provincial councils and local authorities and support for governance institutions;
◆ Supporting structural and governance reforms; and
◆ Support for Government operations.
ADDITIONAL PROPOSALS FOR MAJOR SPENDING PROGRAMMES
◆ Agriculture — $3,2 billion
◆ Social Protection — $1 billion
◆ Health — $0,352 billion
◆ Education — $0,106 billion
◆ Service Providers — $0,120billion
◆ Transport projects — $0,528 billion
◆ Water and Sanitation — $0,168 billion
◆ Institutional Housing — $0,222 billion
ADDITIONAL PROPOSALS FOR MAJOR SPENDING PROGRAMMES
Support to Industry
◆ Clothing Manufacturers Rebate — close loopholes observed in the utilisation of the Clothing Manufacturers Rebate
◆ Suspension of Duty on Commercial Tyres — ring-fence importation of 100 000 commercial tyres at a lower duty rate of 15 pc for a period of twelve months
◆ Electrical Manufacturers Rebate – provide for additional inputs to the list of components that can be imported duty free under the Electrical Manufacturers Rebate.
◆ Customs Duty on Motor Vehicle Filters — ring-fence importation of 100 000 commercial tyres at a lower duty rate of 15pc for a period of twelve months
Revenue Enhancing Measures
◆Taxation of E-Commerce Transactions — reduce the customs duty on selected raw materials used in the manufacture of motor vehicle filters.
◆ Excise Tax — adopt an optimal policy mix between specific and ad valorem excise taxes
◆ Fuel — Ad Valorem excise duty of 45 pc and 40 pc per litre on the CIF value of petrol and diesel respectively
◆ Alcoholic Beverages — adopt an optimal policy mix between specific and ad valorem excise taxes
◆ Tobacco — A combination Excise Duty of ZWL$50 per 1 000 cigarettes plus 20pc Ad valorem on the ex-factory price
◆ Taxation of Direct Fuel Imports — levy excise duty on Direct Fuel Imports in foreign currency.
Tax Relief Measures
◆ Employees’ Tax — revision of the tax-free threshold from the current ZW$350 to ZW$700 and widen the tax bands to a maximum of ZW$30 000, above which income is taxed at the marginal tax rate of 40 pc
◆ Intermediated Money Transfer Tax — review the tax-free threshold from the current ZW$10 to ZW$20 and the maximum tax payable per transaction by corporates from the current ZW$10 000 to ZW$15 000 for transactions with value exceeding ZW$750 000.
◆ Deductibility of Mineral Royalties — allow mining royalties as a deductible expense in the determination of taxable income.
◆ Mining Levies and Charges — finalise and implement agreed positions relating to streamlining fees and charges levied on mining operations.
◆ Mineral Royalties: Gold — review the royalty regime for primary gold producers from a two tier system to a sliding scale royalty regime that is based on gold prices
◆ Review the royalty rate on gold produced by small scale miners from the current rate of 1 pc to 2 pc of the gross fair market value
◆ Alignment of the Definition of Mineral — to align the definition of mineral in the Income Tax Act to that in the Mines and Minerals Act
◆ Removal of Duty on Solar Batteries — remove duty on lithium-ion solar batteries.
◆ Suspension of Duty on Motor Vehicles Imported for use by Physically
◆ Handicapped Persons — waive payment of duty
Fees and Charges
◆ Review of Fees, Levies and Charges — review fees, levies and charges on Government services, in line with economic developments
Tax Administration
◆ Review of Monetary Amounts in Tax Statutes — upward review of monetary amounts in tax legislation
◆ Rate of Interest on Outstanding Tax Debts — to review the interest rate paid on outstanding debts from the current 5 pc plus Libor, to 25 pc.
◆ Capital Gains Tax Computation: Specified Assets — charge a flat capital gains tax rate of 5pc on the gross capital amount
Legislative Amendments
Income Tax
◆ Relaxation of Thin Capitalisation Rules — to exempt from tax, deemed dividends accrued on account of debt contracted through Government facilities by SOEs
◆ Capital Gains — exempt gains accruing from the transfer or disposal of shares to the Sovereign Wealth Fund from capital gains tax.
Value Added Tax
◆ Provision of Back-Up Services on Fiscalised Devices by Approved Suppliers – allow existing licenced vendors to provide back-up service to devices supplied by operators that would have ceased operations.
◆ Zero-Rating of Exports of Exempt Supplies to zero-rate exports of exempt fruits, vegetables and unmanufactured tobacco.
◆ Exemption from VAT: Tobacco not sold on the auction floors — specify the types of tobacco that are exempt from VAT and are also not sold on the auction floors.
◆ Interest on Delayed VAT Refunds – align to the prescribed period within which interest is payable to the 30-day limit.
Customs Duty
Manufacturers Rebate
◆ Food, Soap and Cosmetic – provide for a Rebate of Duty, where duty is entirely suspended.
◆ Payment of Levies by Foreign Visitors- continuation of payment of the above levies in foreign currency, in order to ensure convenience for such travellers.
◆ Payment of Tax, Fees and Charges in Foreign Currency — taxes shall also be payable in foreign currency.
