BILL WATCH 43/2022
[20th September 2022]
The National Assembly Resumes Today, the Senate Next Week
Update on Supplementary Budget
This Bill Watch outlines Parliament’s progress on the Supplementary Budget Bills since our last update in Bill Watch 41/2022 [link] took the story to the end of the sitting on Thursday 25th August. At that point both the Budget Bills – the Finance Bill and the Appropriation (Supplementary) Bill – had been introduced, given their First Readings in the National Assembly and sent to the Parliamentary Legal Committee [PLC] for reports on their constitutionality. [Reminder: MPs had earlier completed both the Budget debate and Estimates of Expenditure, having managed to get the Minister of Finance and Economic Development to agree to change the Estimates for the rest of the year by increasing the amounts allocated to Parliament, the Office of the Auditor-General and the Ministry of Justice, Legal and Parliamentary Affairs. This was achieved by making corresponding deductions from the amount allocated to the Ministry of Finance and Economic Development – and, therefore, without altering the total amount to be appropriated.]
We resume the story with both Houses sitting on Tuesday 30th August. The National Assembly faced the task of completing the passage of the two Bills, if possible, on Tuesday and Wednesday. It was hoped the Senate would wrap up the Supplementary Budget by passing both Bills on Thursday 1st September, bearing in mind that under the Constitution, the Senate cannot amend Money Bills such as Finance Bills and Appropriation Bills. But things did not turn out that way. The Bills were passed by the National Assembly and sent to the Senate, but only very late on Thursday 1st September.
The National Assembly then went into recess until today, 20th September.
The Senate continued sitting the following week. It passed both Bills on 6th and 7th September. But its passing of the Finance Bill was, at the request of the Minister of Finance and Economic Development, qualified by a decision that the Bill be returned to the National Assembly with a recommendation to further amend two clauses on income tax, although they had been dealt with by the National Assembly.
The National Assembly will now, as a matter of urgency, have to consider these recommendations when it reassembles on Tuesday 20th September. Meanwhile the Senate stands adjourned to Tuesday 27th September, next week.
Supplementary Budget Bills: Passage by National Assembly
The House devoted most of its sitting time on the three days ending with Thursday 1st September to passing the Finance Bill and the Appropriation (Supplementary) Bill, both of which received non-adverse reports from the PLC at the start of the week’s proceedings.
Finance Bill The Finance Bill proved the more controversial of the two Bills and was passed with amendments to nine clauses and the deletion of six others under pressure from MPs. The Second Reading stage took most of the Tuesday afternoon until the adjournment at 6.35 pm. The Committee Stage followed on Wednesday, there being no Question Time courtesy of a fast-tracking resolution. The amendments to give effect to changes demanded by MPs were only accepted by the Minister after lengthy debate and bargaining – which accounts for the many hours spent on the Committee Stage, which effectively took up all sitting time on Wednesday and Thursday [on Wednesday the House sat until 6.31 pm and on Thursday 1st September until 8.41 pm].
The effect of the changes made to the Bill is shown in a consolidated version of the Finance Bill numbered H.B. 9A, 2022 [link]. – the original Bill being H.B. 9, 2022 [link]. [Important changes are summarised under a separate heading below.]
Appropriation (Supplementary) Bill This Bill gives effect to the Estimates of Expenditure as amended by the National Assembly on 25th August. As MPs had already debated the Estimates, the Bill took only a matter of minutes to pass through all stages at the end of Thursday’s sitting.
The House then adjourned until 20th September, leaving it to the Senate to complete the passage of both these Bills the following week, starting on 6th September.
Budget Bills in the Senate 6th and 7th September
On 31st August, in preparation for the arrival of the Budget Bills, Senators approved a fast-tracking resolution on the same lines as that approved by the National Assembly. That resolution continued to apply the following week.
Finance Bill In spite of the limits imposed by the Constitution on their powers, Senators nevertheless managed to keep the Minister of Finance and Economic Development busy answering questions about the economy and its problems in general, not just about the two Bills, until just before 6 pm on Tuesday 6th September. At the end of the Committee Stage of the Finance Bill, however, the Minister puzzled Senators by asking them to send the Bill back to the National Assembly with a recommendation to clear up discrepancies between clauses 2 and 3 concerning the income tax threshold, income tax bands and rates.
The confusion was cleared up the next day, Wednesday 7th September, when the Committee Stage was reopened for the correct procedure to be followed. Senators were asked to approve recommendations specifying the detailed amendments which the Minister wanted to be placed before the National Assembly when it reconsiders the matter. The amendments are intended to make it clear that the new income tax threshold and rates apply only to the five months August to December 2022, and that the old figures will continue to apply to the previous seven months January to July 2022. The Bill was then taken through its remaining stages again, duly passed for the second time and returned to the National Assembly with the recommendations.
Appropriation (Supplementary) Bill There was no problem with this Bill, which was passed without debate after the Minister’s brief explanation of the changes made to the Estimates of Expenditure by the National Assembly.
Summary of the Amendments made to the Finance Bill
Clauses deleted from the Bill
Some clauses were deleted entirely, MPs having correctly objected that they should not have been included in the Finance Bill in the first place:
Clause 22 proposed to amend the Value Added Tax Act by creating a criminal penalty for delays in paying VAT. MPs , from both sides of the House objected to this proposal, saying that the existing provision for civil penalties was sufficient. The Minister of Finance and Economic Development did not need much persuading to drop the clause. It was deleted.
Clause 30 proposed amending the Customs and Excise Act to make the Zimbabwe Revenue Authority [ZIMRA] the temporary Border Ports Authority and confer sweeping powers and functions on it as such – all of this pending the enactment of an Act of Parliament establishing a permanent Authority. MPs strongly objected to including the clause in the Finance Bill, saying the establishment of so important a body called for a separate Bill and questioning the laying an extra, albeit temporary, burden on ZIMRA, given its existing workload. The Minister in response explained the reasoning behind ZIMRA being proposed as the temporary Authority, but MPs – again including MPs from the governing party – were unconvinced. The Minister dropped the clause “because that is the mood of the House”, but warning that the present chaos at border posts would continue. It was deleted.
Clauses 36, 37 and 38 proposed apparently simple amendments to the Parliamentary Pensions Act but it quickly became apparent to the Minister that MPs had many and different ideas about MPs’ entitlements. He then suggested that the clauses be dropped, perhaps to be attended to in the next Budget discussions at the end of the year. In any event this clause should probably not have been included in the Finance Bill.
Clauses 2 and 3 – Income and threshold and bands These clauses in their original form proposed to increase both the threshold [the income at which income tax becomes payable on ZW$ income] and the tax bands specifying the rates of income tax, with effect from 1st August 2022. MPs rejected the Minister’s proposals as utterly inadequate to cope with inflation, and insisted that the amounts be increased. They suggested the threshold be raised from the Minister’s proposed threshold [a monthly income of ZW$ 50,000] to ZW$ 100,000 per month or even higher; the Minister eventually compromised on increasing the threshold to ZW$ 75,000 per month. Proportional changes to the tax bands were agreed. Result: for the last five months of 2022, a monthly salary of ZW$ 75,000 will be tax-free and the highest rate of income tax [40%] will be charged on a monthly salary of over ZW$ 1,000,000.
Note: There was no change to the tax threshold or bands for incomes in US dollars.
Clause 4 – Automated financial transactions tax [on cash withdrawals] This tax was adjusted by Statutory Instrument 96/2022 of 1st May 2022; subclause (2) of this clause validates the SI retrospectively from 1st May 2022, made under section 3 of the main Finance Act that requires any changes made to be confirmed by Parliament. The original version of subclause (1) stuck to SI 96’s 2% tax on the amount of any withdrawal of US dollars exceeding US$ 1,000, but the Minister agreed to reduce it to 1%. Otherwise the rates remain the same as fixed by SI 96 [5 ZW cents for a ZWL withdrawal of more than ZW$ 1,000. and 5 US cents for a withdrawal of US$ 1,000 or less].
Note: As SI 96 is validated retrospectively to 1st May, there will be no refunds for past transactions to which the rate of 2% applied. The new rate of 1% will only come into force on the date this Finance Bill is published in the Government Gazette as the Finance Act, 2022; and it will only apply to transactions on or after that date..
Clause 5 – Presumptive tax on informal cross-border traders The Minister agreed to reduce his proposed increase of this tax from 30% of the value for duty purposes of the goods being imported to 20%.
Clause 21 – Manner in which VAT to be paid Subclause (1) of this clause amends section 48(4) of the Value Added Tax Act to clarify its effect by referring to both section 41 and 44C of the Reserve Bank of Zimbabwe Act, instead of only to section 41. There was no objection to it. Hon Biti took issue, however, with subclause (2) and said it was a badly drafted and an incomprehensible “dog’s breakfast”. After a brief discussion the Minister agreed to the deletion of subclause (2).
Clauses 24 and 25 – Rates of capital gains tax and capital gains withholding tax These clauses affect sections 38 and 39, respectively, of the Capital Gains Tax Act, which set the rates of the taxes. Their original purpose was to curb speculative conduct in the short-term buying and selling on the stock exchange of listed securities by imposing a punitive tax of 40% of the sale price of securities held for 270 days or less. MPs, citing the undesirable effects this would have on the Stock Exchange, pressed for a reduction of the period. The Minister agreed to reduce the period to 180 days. Both clauses were amended.
Clause 32 – Royalties on platinum and lithium The Bill proposed an increased royalty on platinum [from 2.5% to 5%] and the imposition of a royalty of 5% on lithium. After MPs called for the rates to be increased, the Minister agreed to increase the royalties to 7% on both platinum and lithium. The clause was amended.
Clause 40 and Schedule The clause, together with an eight-page Schedule [in very small print], amends specified ZW$ amounts in various financial laws. At the request of the Minister one consequential amendment was made.