Simbarashe Hamudi
THE 24th Schedule to the Taxes Act, enacted in terms of Section 36A, establishes the legal framework for the tobacco levy. Over time, it has been amended and refined, notably through Finance Act 8 of 2015 and subsequent legislative changes. The schedule outlines the mechanisms for assessing, withholding, paying and administering the tobacco levy, a statutory charge levied on the sale of tobacco in Zimbabwe. Given the central role tobacco plays in the national economy, the levy represents an important source of government revenue and regulatory oversight.
At the core of the schedule is a detailed interpretation section that defines the key terms used throughout the provisions.
An “auction floor” refers to premises licensed for the sale of auction tobacco, while “auction tobacco” is tobacco declared as such under the Tobacco Marketing and Levy Act. An “auctioneer” is the holder of an auction floor licence. The term “buyer” includes individuals or entities licensed or required to be licensed as buyers of auction tobacco, those registered as authorised buyers, or contractors. “Contract tobacco” refers to tobacco grown and sold under a tobacco contract, which is a formal arrangement between a grower and a contractor. In such arrangements, the contractor finances or supplies inputs to the grower in return for the exclusive right to purchase the crop. These definitions are critical because they identify who is subject to the levy and who bears responsibility for its administration.
The tobacco levy applies to both auction tobacco and contract tobacco. The levy is calculated based on the “price” of the tobacco, which is defined as the total amount payable by the purchaser under the agreement of sale. According to paragraph 22A of the schedule, the levy is shared between buyers and sellers. Buyers of auction and contract tobacco are charged at a rate of 1.50 cents per dollar of the sale price. Sellers are charged at a rate of 0.75 cents per dollar. This dual-rate structure distributes the fiscal burden across both sides of the transaction, ensuring that each participant contributes proportionately to government revenue.
The responsibility for collecting the levy does not rest solely with growers or buyers. Instead, paragraph 2 of the schedule places the duty to withhold and recover the levy on auctioneers and contractors. In the case of auction tobacco, the auctioneer must withhold the seller’s portion of the levy from the proceeds of the sale. Additionally, before releasing the tobacco to the buyer, the auctioneer must recover the buyer’s portion of the levy. In the case of contract tobacco, the contractor is responsible for withholding the levy from the amount payable to the grower. Once withheld or recovered, the amounts must be paid to the Zimra commissioner within the prescribed period following the date of sale or the transfer of possession.
An important safeguard in the schedule is the priority granted to the tobacco levy. The law expressly states that the levy must be withheld notwithstanding any writ of execution, attachment, or other legal process affecting the tobacco or its proceeds. Furthermore, the levy must be deducted before any other amounts are withheld under any other law. This ensures that government revenue takes precedence over other claims, reinforcing the levy’s status as a statutory obligation of high priority.
Transparency is reinforced through certification requirements. Whenever an auctioneer or contractor withholds or recovers the tobacco levy, they must issue a certificate to the seller or buyer, as the case may be. This certificate, in a form approved by the commissioner, must clearly state the sale price of the tobacco and the amount of levy withheld. The issuance of accurate certificates provides accountability and allows taxpayers to maintain proper financial records. Failure to provide such a certificate, or the provision of an incorrect one, constitutes an offence. The penalties include fines or imprisonment, with harsher consequences where the misconduct is proven to be wilful.
In addition to withholding and certification, auctioneers are required to submit returns to the commissioner. Payment of the levy must be accompanied by a prescribed return detailing the relevant transactions. However, the schedule permits the return to be submitted separately, provided it is filed no later than the fifth day of the month following the month in which the levy was paid. This reporting obligation enhances administrative efficiency and enables the revenue authority to reconcile payments with recorded sales.
The schedule also addresses the consequences of non-compliance. An auctioneer or contractor who fails to withhold, recover, or remit the levy becomes personally liable for the unpaid amount. In addition to paying the outstanding levy, the defaulter must pay a penalty equal to 15 percent of the unpaid amount and the principal. This financial sanction underscores the seriousness of the obligation. However, the commissioner is granted discretion to waive all or part of the penalty if satisfied that the failure to comply was not due to an intention to evade the law. This discretionary power ensures that penalties can be tempered with fairness in appropriate circumstances.
Provision is also made for refunds. If a person demonstrates that they have paid more tobacco levy than was properly due, the commissioner is required to authorise a refund of the excess amount. However, such claims must be made within six years from the date of overpayment. This time limitation balances the need for fairness to taxpayers with the need for finality in tax administration.
In conclusion, the 24th Schedule provides a comprehensive and structured framework for the administration of the tobacco levy. By clearly defining the parties involved, specifying rates, imposing withholding obligations, and establishing penalties and refund mechanisms, the law ensures systematic and efficient revenue collection.
l Hamudi is tax partner at Baker Tilly Central Africa, based in Harare, Zimbabwe. He can be contacted at +263 775 399 536 or simbarashe.hamudi@bakertilly.co.zw