Zimra 'clarifies' backdated VAT on rice

THE Zimbabwe Revenue Authority (Zimra) has maintained that the collection of Value Added Tax (VAT) on rice packages of 25 kilogrammes and below, which is being backdated to February 2017, is in line with the law.

This follows claims by the Confederation of Zimbabwe Retailers (CZR) that Zimra's persistence to collect VAT on rice was promoting policy inconsistency.

The retailers contend that the move is against the VAT exemption for rice set out in Statutory Instrument (SI) 9 of 2016.

The CZR has also argued that the decision to collect VAT on rice was undermining the need to foster property rights and the "Zimbabwe is open for business" mantra as enunciated by President Mnangagwa.

In response to concerns raised by CZR, the tax collector yesterday dismissed the assertion saying it was not valid as a detailed analysis of the laws in question indicate that VAT is chargeable.

"The SI 273 of 2003 as amended provides for rice that is exempt and what is not so listed is thus standard rated.

"The challenge appears from failure to track the changes with respect to specific tariff headings," said Zimra.

"The VAT status of rice should not be generalised but should be specific to tariff codes . . . this matter has been brought to the attention of the Ministry of Finance and Economic Development not only by Zimra but by both specific tax payers and industry representatives resulting in the Zimra position being upheld."

The tax authority noted that VAT administration relies on self-assessment declarations and, thus, from time to time and based on risk management framework, the tax collector carries out verifications or audits of such self-assessed declarations.

"It is during such audits that errors of interpretation of the law such as the case in point are then discovered and corrected.

"Using this approach tax audits have been conducted and will continue with the view of making sure that there is consistency in the interpretation and application of the law in the supply of rice in the market," said Zimra.

It said the amendment of VAT regulations clearly shows the category of rice that is standard rated and that which is zero-rated.

The authority said rice packed in quantities less than 25kg is standard rated in general except for broken rice.

"The Zimra system used for the administration of VAT on the importation of goods is correctly configured in line with the amended regulations," it said.

Zimra said its mandate also includes assessing and collecting the tax due from taxable transactions carried on by registered operators.

This obligation, it said, was enshrined in the Value Added Tax Act [Chap. 23:12] and, therefore, implementing this requirement is not in any way a violation of property rights as purported by CZR. Zimra said both in terms of the law and administratively, it operates a "very clear" dispute resolution mechanism.

"Any taxpayer who does not agree with the Zimra interpretation of the law is, thus, advised to use such clearly laid down procedures.

"In carrying out its mandate Zimra is guided by Government policy through the legislated position," it said. With this understanding, Zimra said it was, therefore, not correct to view the position it has taken as undermining the intentions of President of Mnangagwa that "Zimbabwe is open for business", but rather supports his business intentions.