Home » Arts & Culture » Music and Taxation in Zimbabwe

With the Government of Zimbabwe experiencing a lot of resource constraints, a lot of ideas have floated around on how to widen the tax base and as a result expand the fiscal space.

There is no question that the first thing the Government of Zimbabwe (GoZ) needs to do is to scale down a lot on wasteful spending before trying to draw blood out of a stone with an onerous tax regime.

In some respects this has probably made Zimbabweans some of the most highly taxed people in the world!

Zimbabweans even pay car stereo tax (licence)! How many countries out there have ever thought of that? It is ingenious.

Now the country is focused on taxing the ubiquitous informal trader also known as vendors. Of course, there Zimbabwe, is not alone. We can’t credit ourselves with the patent for this one. Many countries do that. In fact, those that are not yet doing that will join soon. The issue is not whether it should be done. The issue is the modalities. With this coming, it would now appear everyone is over-taxed, even twice over. Actually that’s not true. The framework is probably there, but the practice is evident that too many people are not paying taxes as it is. This is not another op-ed targeted at the elite. It’s not about tax being an equaliser. This week is about the music industry.

Music has always been an industry that has been close to people’s hearts. It has helped with most of the revolutions Zimbabwe has gone through. It was and is still the soul of the townships transcending many generations. The country has experienced the genius of Safirio Madzikatire and his Mukadota repertoire. The indefatigability of Oliver Mtukudzi and ever presence of Thomas Mapfumo. There was Devera Ngwena Jazz Band (whose genre sounds nothing like Jazz). In that generation there was the inimitable Leonard Dembo, who showed that a person can herd cattle but still be a creative genius, the Chimbetu family which has now entertained Zimbabweans for as long as they have been independent, all the way to Alick Macheso’s shouting singing style. Now things have heated up with the ghetto youths who are reputed to go for their shows with the backing tracks in their pockets and no accompanying band.

Indeed, this is an industry that has brought a lot of social cohesion, entertainment and a great source of income to the players. For its role, it should be greatly applauded. The only problem is it doesn’t pay taxes.

This industry has remained informalised with no proper definitional clarity. It has brought in good income if some of the musicians’ lifestyle is anything to go by. It has a long value chain therefore employs a lot of people. But it is a known problem internationally that musicians do not interface well with taxation. In this piece this sector has been called an industry because that is what it is. If that is agreed on then there is a need to properly industrialise the sector. Much affluence is being flaunted by people in this very tough industry but there has not been anyone who has formalised their operations except Oliver Mtukudzi. What is interesting is that these entertainers have not even registered to pay for tax in whatever persona they could choose. They do not pay as employees of their bands, nor as self-employed individuals nor as partnerships, private limited companies or whatever corporate persona. Their money is theirs.

Over the last decade a lot of them have gone into the Diaspora for shows. Some are paid a pittance but some have minted good amounts of money. Whilst the rates might have come down drastically, they are still high enough for some to afford lavish lifestyles. Just a few weeks ago, one Winky D was accused of taking a payment of $7 000 and not delivering a part of the contract for it. This was for a very small tour from the 1st to the 3rd of May 2015. So this was income from three shows only.

The context to view this income is to use a country where a lot of people earn less than $500 a month and they pay their dues to the taxman. If one compares this to what the vendors get for their wares, one can easily see that there is a potentially big untapped revenue for the fiscus here. Granted, the Winky D money was not going into one pocket but some of it would have been used to pay employees.

Also granted, the industry is not always consistent with fertile and fallow periods. But which industry does not? The rules as they stand are that if one does not stay at 183 days out of the country then their income from outside Zimbabwe may be subject to Zimbabwean taxation. In terms of the Double Taxation Tax relief rules, a DTR Certificate needs to be filed in for eligible income earned outside Zimbabwe. The diaspora is supporting the artists from home.

The Diasporans always talk highly of their contribution to Zimbabwe. There you go reader. It is not only about remittances, you see. The Diasporans are increasing money in the economy including by small things like getting all their party T-shirts made in Zimbabwe! Talk of helping with the help of the creation of employment. But alas, we digress.

The idea is not to look around on who to tax all the time and shout “Eureka” when one remembers or notices someone escaping through some cracks either in the framework or the regime. The idea is to build an industry that is formalised. An industry that keeps records with backing musicians and others having formal contracts of employment and payslips. More importantly, an industry fully supported by the government because of its role, not only in creating jobs but as well as bringing fiscal consolidation.

The moment a government takes a keen interest in an industry or sector, it also should take responsibility for the growth of the industry but formalisation is key. In that formalisation the government would then support the creative artist by not only giving grants but promoting the growth by having facilities for instruments just as much as there is support for agriculture through sourcing of inputs.

The most visible veneer of support at the moment is when top government officials attend these increasingly lavish album launches with expensively assembled troupes using income which has not and will not be taxed.

This a loophole which any government experiencing a liquidity crunch should be looking at.

As said earlier, the relationship should be a win-win.

The government supports the industry through proper policy formulation in consultation with the stakeholders. All musicians who get support or facilities from government need to be registered for tax purposes and pay their dues. Or if not profitable at least their books and supporting vouchers should be in order and tax returns should be completed. This is the beginning of formalisation of the industry .

There have been cries from the music industry for the government to stop piracy. It goes without saying that the government has a duty of care to everyone including those that are getting away from their patriotic duties of paying taxes. So the issue of piracy needs to be addressed but this is one horse that has bolted the stable.

With digitalisation of music, things have moved on to a level when copyright laws are difficult for highly industrialised countries to enforce when it comes to music sharing and probably impossible for the capacity of the good Government of Zimbabwe. May be this is one area where the players in the industry are called upon to be nimble and adapt quickly.

They should get rewards for their intellectual properties but they also have to live with the fact that downloads are a reality of today’s life. In fact, it is only just going to get worse.

Seasoned musicians are struggling to cope with the genius of new generation of the township entrepreneur in the industry. This is a sector that is creating employment and alleviating poverty in the townships or ghettos, hence the use of the term ghetto youths. The creative industry is growing more than many other service industries in the country at the moment.

The music industry is developing but can only get better with professionalism and governance structures. This is a milestone that is critical if the industry is to be promoted by the GoZ. All reportable income must be reported. Distorted economic decisions happen when there are areas of the economy that are completely ignored whilst there is an unjustifiable emphasis on others.

The so-called developed world is where it is because of the thoroughness of its tax enforcement and compliance regimen.

Everyone has to account for their income. The music industry is big enough to totally ignore from formal public policy.

Source : The Herald