Small community work groups and contractors doing business with the Bulawayo City Council are losing 30% of their payments to withholding tax if they fail to produce valid Zimbabwe Revenue Authority (Zimra) tax clearance certificates.
The development has raised concern at City Hall, with councillors calling for the local authority to help affected groups obtain the required certificates.
According to minutes of the finance and development Clcommittee meeting held on August 25, council is required under Section 80(2) of the Income Tax Act [Chapter 23:06] to deduct 30% from payments to contractors without valid ITF263 tax clearance certificates.
The assistant financial director Isaac Matare said community work groups were regarded as contractors rather than council employees and were therefore required to have tax clearance certificates.
“Community groups fell under the definition of a contract. Community groups should therefore produce tax clearance certificates to avoid the 30% withholding tax,” Matare said.
“Community groups were not classified as employees as they did not possess a contract of employment... In the absence of such a certificate, 30% withholding tax was deducted from their income.”
He said the effects were not confined to community groups.
“The effects of the withholding tax were not limited to the community groups, permanent staff members were also affected,” he said.
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Councillor Dumisani Nkomo said council should assist community groups to obtain tax clearance certificates, while councillor Meli Moyo called for a permanent solution to the payment system.
The assistant financial director further said payments to the groups were made collectively, although there had been challenges.
Mayor David Coltart said assistance could be extended to other groups after a similar group from another constituency had previously been helped to obtain tax clearance certificates.
Meanwhile, council has also moved to tax non-wage benefits enjoyed by councillors and employees.
The minutes state that benefits such as council vehicles, internet data and airtime, subsidised loans, discounted land, school fees, accommodation, staff meals, water and electricity bills and gym facilities could constitute taxable benefits.
A discounted council stand could also attract both income tax and VAT.
The financial director gave an example in which a US$20 000 stand discounted by 40% to a councillor or employee would result in the US$8 000 benefit being subjected to income tax and 15.5% VAT.
Under the example, the stand would ultimately cost US$18 300 after the discounted purchase price, VAT and taxes were taken into account.
