via Zhuwao tosses tax loophole to Chinamasa – DailyNews Live Ndakaziva Majaka • 4 April 2016
HARARE – Indigenisation minister Patrick Zhuwao says his ministry has approached Treasury after it emerged that amendments to Zimbabwe’s black empowerment laws would, in the long run, force empowered employees to sell off their shares to meet tax obligations.
Speaking on the sidelines of a meeting with stakeholders in the capital last week, Zhuwao said fixing the loophole fell out of his purview, so the matter had been referred to the minister of Finance Patrick Chinamasa.
“Of course, we have looked into the issue of the tax loophole and have referred it to the ministry of Finance as we do not have the powers to solve the issue,” he said.
However, in light of the Indigenisation compliance deadline lapse last week the minister said he was unaware when the matter would be resolved.
When the deadline lapsed, the majority of foreign-owned companies had scrambled to submit compliance plans which will see the shares being transferred to black Zimbabweans despite the glaring loophole.
“I cannot tell VaChinamasa how to do his job, we left it in his hands and now we wait for the final position,” Zhuwao said.
This comes as Bankers Association of Zimbabwe legal counsel Neeta Joshi recently told delegates at an indigenisation meeting that amendments to the piece of legislation, which has been blamed for repealing Foreign Direct Investment, had failed to address a crucial taxation loophole.
“We have noticed that the Indigenisation laws and tax laws are not aligned. The current regime provides that when shares are allocated to indigenous Zimbabweans they have to start paying tax obligations, as soon as the shares are allocated.
“However, most of these employees are unable to pay the taxes so in the end they are forced to sell off the shares, this will diminish their shareholding and compromise the company’s indigenisation threshold at the same time,” Joshi said.
She said in the end, employees were going to end up selling their shares to the company that originally gave them the shares thus defeating the purpose of the empowerment law.
The law in question, which compels foreign-owned companies to sell majority shareholding to black Zimbabweans, was recently amended with all foreign-owned companies initially being given up to April 1 to submit compliance documents to their various line ministries.
Through Indigenisation, shares disposed of by foreign companies will be acquired among others by entities such as the National Indigenisation and Economic Empowerment Fund, the government’s Sovereign Wealth Fund, Employee Share Ownership and Community Share Ownership Trusts, the Zimbabwe Mining Development Corporation and any other company incorporated by government.
The advocate also said the people who were supposed to be empowered were “being forced” by the law to sell their shares in the end.
“It makes very little sense for the workers empowered under Employee Share Ownership Trusts to have to sell their shares to pay tax obligations that come with the shares.
“Rather it makes more sense for the tax to come into play when the shareholder chooses to sell,” she said.
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