Breaking: Government to revoke capital gains tax rule, market cheers

Government will soon revoke a statutory instrument that saw disposal of Zimbabwe Stock Exchange listed securities within 180 days from the date of purchase attracting a Capital Gains Tax Rate of 4 percent on the assessed gain, a senior official has said.

Speaking at a panel discussion at the ongoing Zimbabwe Capital Markets and Investment Promotion Conference underway here, Mrs Judith Rusike, Financial Sector Policy in the Ministry of Finance, Economic Development and Investment Promotion said the vesting period “has been reversed” and a statutory instrument in that regard will be “issued any time soon”.

She said Government was also working flat out to resolve the Old Mutual and PPC issue as the two counters are still under suspension.

ZSE chief executive officer Justin Bgoni said removing the vesting period “makes a big difference on the ZSE as it has been a big blight on our capital markets”.

“We are very grateful to Government for making that decision,” said Bgoni.

Market participants welcomed the development. Walter Mandeya of Trigrams Investments highlighted the “complexity” caused by the vesting period, making automation “prohibitively expensive” and hindering investment in new technologies.

“Revoking Statutory Instrument 96 of 2022 is a positive step,” Mandeya said.

“The vesting period distorted price discovery on the exchange.”

He explained how the rule discouraged both buyers and sellers: “Cash-ready investors hesitated to trade due to the tax implications, while sellers faced lower prices and higher withholding taxes if they sold within the period.”

Mandeya concluded, “Removing the vesting period levels the playing field for all investors, especially sellers, which is crucial for accurate price discovery. It also simplifies market operations and tax administration, paving the way for a smoother transition to shorter settlement times.”

A Stockbroker and a member of the ZSE, who spoke off record said” the market is vibrant when it has many buyers and sellers with different views and opinions on/of the market”.

“Short term investors bring good liquidity to the market and aid in price discovery. The more of them we have, the smoother the market curve,” he said.

“Younger investors are exposed to more sophisticated options that give them quick returns, so that liquidity is now in CFDs offshore and forex trading.”-ebusinessweekly