Budget 2021: Ncube targets informal sector to boost tax revenue

Key highlights
·       Cumulative revenue collections for 2020 are projected at ZWL$173.5 billion (16.3% of GDP)
·        A budget deficit of ZWL$4.9 billion (-0.5% of GDP) is anticipated by end of 2020
·        Projects to collect to ZW$398 Billion in 2021
·        The projected expenditure for 2021 is ZWL$421,6 billion and employment costs are expected to take up ZW$142 billion.
HARARE – Finance minister Mthuli Ncube has sought to capture the informal sector through the introduction of new presumptive tax structures and upward revision of existing structures. He also introduced a cannabis levy and made an upward review of excise duties as part of efforts to boost his projected 2021 Budget.
While the Cannabis industry is still in its early stages, Ncube has proposed to introduce a Cannabis Levy, which is chargeable on the value of exports at varied rates of tax that correspond to the level of process. This is premised on the projection that the potential value of cannabis exports for medicinal purposes is estimated at US$1.25 billion next year.
According to the levy proposal, 10% will be charged on export sales value of finished packaged medicinal cannabis oils that are ready for resale; 15% on the export sales values of bulk extracted medicinal cannabis oils that require further processing and/ or packaging; and 20% on the export sales value of dried medicinal cannabis flowers. 
Ncube also reviewed excise duties with tobacco now being charged at an equivalent of US$5 per 1 000 cigarettes plus 20% of the ex-factory price from the current rate of $100 per 1 000 cigarettes plus 20% of the ex-factory price.  Spirits will be charged an equivalent of US$1 per LAA plus 30% from $10 per LAA 30%.  Fortified wines will now be charged an n equivalent of US$0.25/L from $4/L previously. Unfortified wines will attract the same from $3.50/L previously.
A uniformed excise duty on diesel and petrol at US$0.30/L now applies to eradicate the potential misclassification of fuel. Treasury will review taxes and levies on diesel to align with rates applicable on petrol. These taxes and levies include, Carbon Tax, ZINARA Road Levy, NOCZIM Debt Redemption and Strategic Reserve levies. Still on the fuel sector, Ncube said fuel excise duty will be paid in foreign currency unless the importer provides satisfactory documentary evidence to the effect that funds were sourced through the auction system.  To encourage importation of fuel by pipeline, the Petroleum Importers’ Levy has been reviewed to USD$0.05 a litre on both diesel and petrol.
In order to restore value of revenue collections for presumptive taxes, Ncube said a new structure will apply to select informal businesses. Self-employed professionals will now pay presumptive tax ranging from $250 000 to $1 million a month effective January 1, 2021. Under the structure, medical professionals will pay $500 000, engineers $500 000, legal $500 000, architects $250 000 and realtors $1 million. The presumptive tax will, however, not apply to professionals who produce a valid Tax Clearance Certificate for the year of assessment.
A tax on if Micro and Small Enterprises and Informal Operators who operate from designated business premises has been set at US$30 per unit per month with effect from January 1, 2021. The tax will be collected by landlords. Landlords will also collect taxes from hairdressers ($2 500/month), restaurants ($10 000/month), bottle store operators ($10 000/month) and cottage industry ($10 000). Landlords that fail to collect and remit the tax will be subject to a penalty equivalent to the amount of tax payable and interest.
On personal taxes, the tax-free threshold had been reviewed to $10 000 per month from $5 000 with effect from January 1, 2021. Tax bands to begin at $10 001 and end at $250 000 per month, above which the Highest Marginal Tax rate of 40% will apply. The bonus Tax-Free Threshold from $5 000 to $25 000, with effect from 1 November 2020.  

The tax free threshold for the 2% IMTT has been ben revised to $500 from $300 and the maximum tax payable per transaction by corporates from the current $25 000 to $800 000 on transactions with values exceeding $40 million, with effect from 1 January 2021.  

The Minister said that businesses will pay corporate income tax in foreign currency on the basis of gross foreign currency receipts remaining after deducting the prescribed retention or liquidation thresholds.
Other measures
·         VAT Registered Operators’ systems should be interfaced with the ZIMRA server with effect from 1 December 2020, failure of which no operator will be issued with a Tax Clearance Certificate;
·         In addition, non-compliant operators will be excluded from participating in the weekly foreign currency auctions; furthermore, the Revenue Authority will, with immediate effect, undertake a comprehensive audit of all VAT Registered Operators, with a view to account for all sales in foreign currency;
·         10-year-old second hand vehicles removed from Open General Import Licence

Source: Finx