“Tax legislation must be consistent with basic principles of taxation which are transparency, equity, simplicity and neutrality.”

This was said by Zimbabwe’s Minister of Finance, Honourable Tendai Biti, at the launch of the draft Zimbabwe Income Tax Bill on June 4, 2010 in Harare. The bill, which is set to become law before the end of the year, seeks to replace the current Income Tax Act which the Minister said is too complex to be understood by an ordinary person.

“I announced in the 2010 Budget Statement that a number of African countries have, over the past decade reformed their Income Tax systems and adopted modern Income Tax legislation with a view to ensure compatibility with fundamental tax policy principles of simplicity, equity, neutrality and consistency with international best practices,” said Minister Biti.

A Steering Committee on Tax Reforms comprising tax experts from Treasury, the Zimbabwe Revenue Authority (ZIMRA) and the private sector was subsequently formed to oversee the redrafting of the new Income Tax Act.

The Income Tax Bill proposes a number of changes notably a departure from source-based to residence-based taxation; tax laws that abide by Generally Accepted Accounting Principles (GAAP); enhancement of anti-avoidance measures in line with international best practice; a revamp of appeal procedures; and streamlining of allowable deductions to those expenses “incurred in the production of income” only.

Minister Biti urged all stakeholders to make comments on areas that need improvement and to make the bill one of the topics of discussion at winter schools.

The bill is part of a series of fiscal reforms that are being undertaken by the Government of Zimbabwe. To date, ZIMRA has successfully set up large taxpayers’ offices in a bid to improve relationships with its clients as well as to improve compliance levels. Plans are also underway to set up a one stop border post at Beitbridge and to streamline the number of agencies at ports of entry. Focus will also be put on improving service delivery with a view to improving convenience to the transacting public.