Govt to legalise tax on private car sales

Vincent Kahiya

THE government is taking steps to correct embarrassing anomalies in tax collection by enacting a new law that will allow it to tax private sales of second-hand motor vehicles.


The Ministry of Finance is during the current session of parliament expected to bring to the House the Financial Laws Amendment Bill, which will amend the Capital Gains Tax Act, the Finance Act, the Income Tax Act and the Sales Tax Act.


Last month, the Zimbabwe Independent carried a story in which lawyers pointed out that there was no enabling legislation empowering the Zimbabwe Revenue Authority (Zimra) to collect tax on the private sale of second-hand motor vehicles. Zimra has since December last year been levying tax on the vehicle sales. Change of ownership of a motor vehicle cannot be effected without payment of the tax.


Lawyers pointed out that Zimra was acting illegally because the Sales Tax Act did not grant those powers. Zimra started to collect the tax in December last year after Finance minister Herbert Murerwa announced in his budget speech in November that the sale of second-hand vehicles would be subject to tax.


The proposed law will seek to retrospectively legitimise the illegal tax collection by Zimra as from December 1 2002.


According to Section 16 (7) of the Constitution of Zimbabwe, tax may only be collected under the authority of the law. Section 4 of the Sales Tax Act stipulates that the incidence of sales tax can only be changed by an Act of parliament.


The proposed legislation stipulates that capital gains tax must be paid before transfer of a specified asset. Motor vehicles will be subject to a 25% import duty rather than the present 15%. Sales of motor vehicles by private agreement will be subject to sales tax. Details of the payment of carbon tax have been revised to empower Zimra to collect carbon tax from foreigners driving into Zimbabwe.


This will entail amendment of Section 4 of the Sales Tax Act and parts of the Capital Gains Tax which set out the tax rate. Lawyers have criticised the enactment of laws in retrospect to correct blatant legislative anomalies.