The Zimbabwe Revenue Authority (Zimra) plans to introduce value-added tax (VAT) on residential stands being developed by financial institutions, an official has said.
BY VICTORIA MTOMBA
Speaking at the FBC Holdings analyst briefing on Monday, group chief executive John Mushayavanhu said Zimra has been requesting different levies from the building society and the group has made a provision of $2,4 million for that.
“Zimra has all sorts of levies which we do not understand,” he said.
A source in the financial services sector said when financial institutions sell land to customers, the tax collector is paid VAT for the land. But financial institutions pay funds directly to the supplier so that money is not diverted.
“This is where Zimra is coming and requesting VAT from financial institutions. All along development of stands has been exempt from VAT. This will be a new phenomenon,” the source said.
VAT, also known as goods and services tax, is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price.
Mushayavanhu said the bank was arguing that it cannot pay VAT on mortgages as they are financial services. FBC Building Society’s total assets stood at $109,4 million in 2014 up from $78,9 million in 2013 and total income stood at $14,1 million up from $12,9 million.The mortgage finance during the period under review contributed just above 40% to profit before tax.
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The tax collector has been facing challenges in collecting taxes from corporate and individuals and it is owed over a billion dollars in unpaid tax.
The revenue collector is now government’s major source of income as Treasury struggles to pay civil servants who consume over 80% of the country’s national budget.
Zimra is working towards collecting taxes from the informal sector which now represents 75% of the working population. The country’s formal sector has virtually collapsed resulting in 55 000 job losses. Meanwhile, Mushayavanhu said FBC was among the four surplus banks in the interbank facility and would soon increase its contribution to the facility.
“We cannot put money into treasury bills. We have paid our contribution to Aftrades,” he said. The interbank facility is guaranteed by the African Export-Import Bank (Afreximbank) under the under the Afreximbank Trade Debt Backed Securities (Aftrades) up to $100 million.
Mushayavanhu said Aftrades was the way to go. He said the interbank will make it easier for the surplus and non surplus banks to transact.
