Dealers appeal for removal of VAT on rice

Players in the rice supply chain have appealed to Government to reconsider a 14,5 percent Value Added Tax (VAT) charge on the commodity.

A Government VAT payment request in retrospect, for a period spanning more than three years, has since been made to players in the supply chain of the commodity.

This step was taken irrespective of the fact that the Zimra Ascycuda System has not been charging VAT on rice to retailers and suppliers since 2017. Not a single retailer or player in the supply chain has charged VAT while GMB/Silo foods is still not charging VAT.

Apart from resultant crippling effect on business financial flow, there is a projected 14,5 percent increase in the price of the commodity that will be pushed to the consumer, if VAT on rice charged in retrospect is allowed to stand.

Rice was exempted from paying VAT in 2017 by the then Finance and Economic Development Minister Patrick Chinamasa, but suppliers and packers of 25kg  or less have received requests for VAT payment dating back to 2017. However, the situation changed following a letter dated September 22, 2020 by Finance Permanent Secretary Mr George Guvamatanga to Delloitte and Touche.

"I write with reference to your request for Treasury to exempt all types of rice or VAT with effect from February 1, 2017 to enable Zimra to reverse your client's tax liability arising from failure to charge and collect VAT on rice in packages of 25kg or less. Treasury notes the justification given for failure to charge and remit VAT.

"In addition, Treasury appreciates your concerns over the financial burden that may result from collection of the outstanding tax. You will, however, appreciate that the reclassification of rice and packages of 25kg or less had a public policy objective.

"More specifically the measure was aimed at supporting the local packaging industry through promoting repackaging of cheaper bulk rice into smaller units. Furthermore, legislation to give effect to the measure was promulgated timely and tax payers had an opportunity to seek clarity or raise concerns over any omissions with Treasury.

"In view of the above, your request for a retrospective exemption of rice in packages of 25kg or less is therefore rejected. Your clients should thus approach Zimra for a payment plan."

Confederation of Zimbabwe Industries' chairman for the Trade Development and Investments Promotion Committee, Mr Henry Nemaire, said this will ruin industry's cashflow. He urged Ministry of Finance and Economic Development to scrap VAT on rice.

"The Minister of Finance Professor Mthuli Ncube, should make a political and economic decision to zero rate rice, which is a basic food item. This should be done in retrospect.

"Zimbabwe consumes about 200 000 tonnes of rice per annum. The policy inconsistency on VAT on rice is not attainable. In 2004 vat charged on rice was 15 percent, in 2008 it was zero rated, in 2016 it was exempted, in 2017 vat was restored at 15 percent for two weeks from February 1 to 15.

"In the same year rice was exempted from vat again by Chinamasa. Now bulk rice is exempted but small packs attract VAT at 14,5 percent. Such inconsistencies will discourage investments and reverse price stabilisation measures put in place by Government," he said.

Consumer Council of Zimbabwe executive director Ms Rosemary Siyachitema, also urged Government to scrap VAT on rice.

"Rice is the only suitable alternative to staple maize meal for the consumer. We are aware that industry will simply pass on the costs to the consumers most of whom are already struggling to put food on the table.

"We urge policy makers to do the right thing by exempting rice from VAT so that at least it remains relatively affordable to the general public," said Ms Siyachitema.