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Retailers want zero VAT restored on basics

by Staff reporter
06 Dec 2023 at 05:04hrs | Views
THE Confederation of Zimbabwe Retailers has called on Finance, Economic Development and Investment Promotion Minister Mthuli Ncube to reverse proposals to introduce Value Added Tax on a small range of basic commodities, saying it will increase the cost of living for low-income earners and move more spending into the informal sector.

CZR president Mr Denford Mutashu made the call in a statement following the presentation of the 2024 budget proposals by Prof Ncube on Thursday last week.

While acknowledging Government's efforts to increase fiscal revenues to fund development, Mr Mutashu said there was a need to balance it with the needs of marginalised groups.

"Finance Minister Ncube proposed a balanced budget proposal which seeks to ramp up fiscal revenue for economic development while remaining alive to the greater need for expansion of social safety nets for the marginalised.

"The CZR has however, noted with concern the proposal to introduce VAT on various basic commodities. Given our current GDP per capita, we cannot have VAT on these. Even high-income countries do not have VAT on basic commodities. Implementing the policy will be disastrous to poor people and will result in more people being food insecure. CZR notes that the policy will also result in further informalisation of the economy and negatively impact formal compliant businesses," Mr Mutashu said.

In his budget proposal, Prof Ncube limited VAT exemptions to medicines and medical services, goods for use by the physically challenged, sanitary wear, fuel and fuel products, agricultural inputs, implements, and produce (excluding live animals, ground nuts, cotton seed, soya beans, and products thereof), wheat (excluding bread), milk, and salt.

Fuels are taxed separately at levels above VAT rates, and so are free of VAT to avoid double taxation.

Mr Mutashu said the proposal could also increase smuggling of basic commodities from South Africa as they are exempt from VAT and the resultant effect will be the export of jobs to SA. While legally imported goods subject to VAT are charged this as they cross the border, smuggled goods evade the tax.

"The recommendation is to maintain the current status quo on zero-rated and exempt supplies. CZR however, submits that the focus should be on eliminating the 10 percent exchange rate cap to make formal businesses more competitive. This will have a positive effect on the fiscus as a result of increased revenue on all tax heads," he added.

Mr Mutashu also commended the proposed policy by Prof Ncube to restore sanity on supply chains by enforcing manufacturers to sell only to registered operators. He added that there was a need to have a co-ordinated and well-structured formalisation strategy.

"A simple, low tax system that is easy to comply with, will go a long way in encouraging compliance and growing the tax base. This will in turn reduce the burden on already existing taxpayers. We there implore the Government to come up with a tried and tested presumptive tax system," Mr Mutashu said.

Source - The Herald