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Securities Commission seeks tax incentives

THE Securities Commission of Zimbabwe (SECZ) has asked Finance minister Tendai Biti to introduce tax incentives for foreign investors on the equities market owing to subdued foreign participation.

Biti, who is struggling to raise funds needed to resuscitate the economy, is expected to present the national budget statement before parliament next month.
The Zimbabwe Stock Exchange (ZSE), which was ranked the worst performing bourse in Sub Saharan Africa by Netherlands based Amstel Securities with negative YTD return of about 7% and market cap of about US$3,5billion, has in recent months lost ground owing to liquidity challenges in the country and investor anxiety triggered by indigenisation regulations targeting foreign-owned companies. YTD describes the return so far this year.
The industrial index which started the year at a high of 156,52 had dropped to 127,46 by June, while the mining index fell from an opening of 209.8 to 143,08.
Market capitalisation plummeted to US$3,19 billion in June from US$3,97 billion in January.
SECZ CEO Alban Chirume in his 2011 national budget proposal to Biti said government should exempt value added tax on foreign investors currently contributing 34% of trades on the local bourse. This, he said, would boost foreign investment on the local bourse badly in need of fresh capital.
The capital markets regulatory body is also lobbying the treasury to slash corporate tax for Zimbabwe’s listed companies to 15% from 25%.
The possible loss of revenue, according to Chirume, would be offset by Vat payments which are expected to surge on the back of increased trades and more listings.
“There is need to exempt foreign clients from the 15% Vat payable on broker commission as these clients are subject to taxation in their own jurisdiction and not in Zimbabwe,” Chirume said
“SECZ proposes increasing foreign investment thresholds (combined) for any listed counter from the current 40% to 49%, thus boosting Foreign Portfolio Investments and offering business development rebates on the net proceeds of foreign deals brokered or sourced by Stock broking firms, Investment Management firms and investment advisers. SECZ propose a rebate of 0,1% on net proceeds.”
Chirume further asked treasury to set up a capital markets development fund and exempt tax on income earned from funds invested in this fund.

 

Bernard Mpofu

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