THE Zimbabwe Revenue Authority (Zimra) recently demanded backdated value added tax (VAT) on the commission charged by stockbrokers in a move that clearly beats any logic.
Zimra’s motive is very difficult to understand beyond the fact that it is a mere fund-raising e
xercise at the expense of any efforts to bring back confidence to the already battered economy.
Questions need to be asked as to why the stockbrokers have to pay VAT when they never collected any in the first place. The claim by the stockbrokers that they had an agreement not to charge the VAT needs to be looked at seriously.
If the claim of an existing agreement by the stockbrokers is true and the records are available, it is Zimra’s administrative problem to chase up all the people that traded in shares during the period for the unpaid VAT.
In the absence of the agreement, the fact that the stockbrokers did not collect the tax at the time of the trades is an issue that could have been dealt with in a different way. They could be penalised for failing to do so, but to ask them to pay the VAT is not a progressive option at all. It epitomises the culture of punishment that has become endemic in Zimbabwe.
Putting aside the unrealistic nature of the demand, it is even more difficult to understand this move from a taxation point of view. Suppose the stockbroker pays this business VAT plus the late payment penalties, will this not lead to a double taxation scenario, given that the stockbroker’s profit comes from income generated by commission?
Will they account for this payment as an operational expense or as part payment towards future tax liabilities?
Zimbabwean authorities need to come up with measures that inspire confidence in the nation and the outside investor. The heavily punitive reaction as shown by the revenue authority towards the stockbrokers and by the Reserve Bank towards the bankers and asset management firms previously, is the worst way of dealing with businesses which need to be treated as partners and not as potential criminals.