Tax war paralyses Zimbabwe bourse

Tax war paralyses Zimbabwe bourse

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By Stella Mapenzauswa

ZIMBABWE'S bourse entered a second week of paralysis on Monday, losing the government billions of dollars in revenue, as stock-brokers and tax authorities bickered over a contentious levy traders say would bankrupt them.

The Zimbabwe Stock Exchange (ZSE) suspended trade last week after the Zimbabwe Revenue Authority (ZIMRA) demanded that stockbrokers pay value added tax (VAT) backdated to 2004, prompting an outcry from investors and broking firms who said the amounts involved would force them to shut down.

"There's no progress yet and there was no trading today. Brokers' representatives are expected to hold a meeting with the finance ministry today," an official at the stock exchange told Reuters, declining to give further details.

ZSE Chief Executive Emmanuel Munyukwi was not immediately available for comment on Monday, but has in the past insisted that brokers are exempt from paying the 15 percent VAT under Zimbabwe law.

The stalemate has lost President Robert Mugabe's cash-strapped government billions of Zimbabwean dollars in stamp duty and other tax revenue amounting to seven percent of the value of all trades.

"I would say on a daily basis we are looking at the government raking in about Z$10 billion in revenue from the stock exchange on a good day," one broker told Reuters.

The 80-counter strong bourse, southern Africa's second largest after South Africa, has thrived in recent years in defiance of an 8 year economic recession. ZSE statistics show that 4.6 trillion local dollars worth of shares were traded on the exchange in April.

Last August a stalemate over a 10 percent withholding tax on all shares stopped business on the bourse for over a week, forcing the government to halve the levy.

In an editorial on Monday, the state-controlled Herald newspaper urged finance authorities and brokers to find a resolution to the dispute, which it said was hurting the economy and had resulted from "a lack of clarity on issues to do with the tax law governing stock market transactions".

"By allowing it (the impasse) to drag on, it will scare away investors and does not augur well for our economy," the paper said. Zimra has not collected any stamp duty or withholding tax, while stockbrokers have lost on commission." - Reuters
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