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Mthuli Ncube's new tax regime to trigger price hikes

by Staff reporter
07 Dec 2023 at 07:13hrs | Views
The recently proposed tax regime by Finance Minister Mthuli Ncube is anticipated to lead to significant price increases, with the Grain Millers Association of Zimbabwe (GMAZ) forecasting a potential US$2 price for bread in January 2024.

GMAZ emphasized that the exclusion of maize meal, wheat flour, bread, and salt from the list of VAT-exempted goods in Ncube's budget for the upcoming year could have a substantial impact on food security.

The proposed policies, scheduled to take effect on January 1, 2024, have faced criticism due to the introduction of various taxes.

"The Tax law that existed before this budget recognized that basic food commodities such as maize meal, wheat flour, bread, and salt are critical goods needed for the sustenance of life and must be affordable to all households. The intention of the legislature in VAT zero-rating these commodities was to ensure that they remain affordable to the generality of Zimbabweans," explained GMAZ President Tafadzwa Musarara.

He continued, "The Minister has reversed this provision and only limits the VAT exemptions to sanitary pads, medicines, exports, agricultural inputs, etc. Sanitary pads are very important to our women, but maize meal and wheat flour are more important."

VAT, calculated at 15% of the actual price, is a concern for GMAZ.

Musarara added, "The peremptory interpretation of this proposed measure is that with effect from 1 January 2024 basic commodities such as maize meal, wheat flour, and bread (which were previously VAT exempted) will be liable to VAT, and therefore, shall go up by at least 15%. The prevalent aggregate demand levels cannot afford such an increase and sustain the current consumption volumes. Food security, at the household level, will be threatened. Bread, for example, will not only go up by 15% from the current US$1 per loaf price to circa US$1.15, but due to the unavailability of US dollar coins, it will be rounded up to US$2 as retailers will force consumers to buy other small items such as sweets, snacks, bottled water, etc."

Ncube's measures, aimed at tightening government spending and increasing revenue, include a 1% tax on residential houses worth US$100,000 or more, an increase in tax on un-beneficiated lithium from 5% to 6%, and an elevation of the corporate income tax rate from 24% to 25%.

Source - newzimbabwe