GOVERNMENT will introduce a cannabis (mbanje, imbanje) tax to tap into a potential US$1.25 billion export industry of the herb for medicinal purposes, Finance Minister Mthuli Ncube said yesterday.
Presenting the 2021 national budget, Ncube proposed a 10% cannabis levy on export sales of finished packaged medicinal cannabis oils, 15% on the export of sales values of bulk extracted medicinal cannabis oils that require processing and 20% levy on the export sales value of dried medicinal cannabis flower.
“I, therefore, propose to introduce a Cannabis Levy, chargeable on the value of exports, at the following varied rates of tax that correspond to the level of processing,” Ncube said.
He said the cannabis industry has potential to general US$1.25 billion in export receipts for the year 2021.
In September, the government passed Statutory Instrument 218 Agricultural Marketing Authority (Industrial Hemp) to govern the production, procurement, distribution, possession, sale, provision and transportation of the crop.
The proposed levy is part of Ncube’s moves to widen the tax base as government reserves remain subdued. With a debt overhang and no budgetary support, government, has been accused of over-milking the cow through the over-taxation of vulnerable people.
To improve workers’ disposable incomes, Ncube set the tax-free threshold at ZW$10 000 from ZW$5 000 per month with effect from 1 November 2020.
Ncube will in 2021 continue to take advantage of the Intermediary Tax to widen his tax net.
He proposed a tax-free threshold of ZW$500 from the current ZW$300, while the maximum payable per transaction by corporates has been set at ZW$800 000 from the current ZW$25 000 on transactions with values exceeding ZW$40 million, with effect from 1 January 2021.
Ncube also reduced the corporate income tax for income accruing from mining operations from the current 25% to 24% with effect from 1 January 2021. This is meant to improve investments in the sector. Businesses that pay corporate tax in foreign currency will continue paying the prescribed rates.
Ncube also proposed a cocktail of measures to discourage the consumption of hazardous substances like alcohol and tobacco.
“Honourable Members will recall that Government, in 2019, adopted an optimal policy mix of specific and ad-valorem excise taxes for tobacco and alcoholic beverages. This is intended to preserve the share of excise revenue contribution, promote sustainable growth of the industry, as well as discourage consumption of hazardous substances,” Ncube said.
In a bid to restore value of revenue collections in a hyperinflationary environment, Ncube proposed a review of the presumptive tax structure, with effect from 1 January 2021.
Presumptive tax is a fixed lumpsum tax levied on individuals or businesses based on the occupation or business activity. It was introduced with effect from 2005 and the tax corresponds to the average income level presumed to be earned by members of a particular occupation or business grouping.
Ncube proposed a presumptive tax of an equivalent of US$30 per unit per month.
Hairdressers, restaurants, bottle store operators and the cottage industry, will pay ZW$2 500, ZW$10 000 and ZW$10 000 respectively.
Landlords will be responsible for collecting the taxes with effect from 1 January 2020, and failure to comply will attract a penalty.
Ncube also extended his tax net to self-employed professionals who will be expected to pay presumptive tax per month.
Medical professionals will pay ZW$500 000, engineers ZW$500 000, legal ZW$500 000, architects ZW$250 000 and ZW$1 000 000 for realtors.
Ncube said the presumptive tax will, however, not apply to professionals who produce a valid tax clearance certificate for the year of assessment.
Following years of failed tax regimes on the informal sector, Ncube also proposed a presumptive tax for micro operators.
“I, therefore, propose to introduce a presumptive tax of an equivalent of US$30 per unit per month,” Ncube said.
Landlords will be responsible for the collection of the above taxes which take effect from 1 January 2021.
To tap into the small to medium enterprises, the Zimbabwe Revenue Authority will establish the Micro, Small to Medium Enterprises Specialised Unit to ensure contributions from this sector.
“This will ensure that the sector’s contributions to fiscal revenues is commensurate with the level of economic activity,” Ncube said.
Ncube also proposed that toll fees be payable in both foreign and local currency. This, Ncube said would capacitate the Zimbabwe National Road Administration (Zinara) to pay its debts. To discourage, the importation of fuel by road, Ncube proposed a Petroleum Importers’ Levy of USD$0.05 a litre on both diesel and petrol. This is done to encourage the use of the fuel pipeline that stretches from Beira to Msasa in Harare.