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Mthulisi Ncube exempts VAT on key basic commodities

by Staff reporter
01 Feb 2024 at 04:59hrs | Views
TREASURY has gazetted the suspension of Value Added Tax (VAT) on selected basic commodities with effect from today as part of Government measures to tame price increases while boosting consumer purchasing power and aggregate demand for businesses.

Consumers and economic analysts have welcomed the gazetting of the new regulations, which give full effect to early pronouncements by the Treasury following the fine-tuning of some of the measures introduced through the 2024 National Budget.

This has seen basic food items such as bread, milk, cooking oil and maize meal being exempted from Value Added Tax, thereby eliminating public fears of price increases that had gripped consumers.

Earlier the Government had engaged and considered submissions from business leaders who felt that the proposed VAT measures in the 2024 National Budget were likely to strain ordinary people and businesses as the move had the potential to fuel price escalation beyond income levels.

The stakeholder concerns prompted the Treasury to constitute a technical committee to receive input from representative members under the umbrella body of the Confederation of Zimbabwe Industries.

The committee undertook an impact analysis on the implementation of some of the measures introduced through the 2024 Budget, in particular with regards to tax compliance en route to the market, mitigation of consequences of the sugar on health through a special surtax and a few tariff lines omitted on exemption from Value Added Tax, to cover the whole value chain that includes cotton and soya seeds to cooking oil.

Through Statutory Instrument 10A of 2024, published in a supplementary Government Gazette issued yesterday, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, said the Customs and Excise (Suspension) Regulation 2003 published in Statutory Instrument 257 of 2003 has been repealed.

"It is hereby notified that the Minister of Finance, Economic Development and Investment Promotion, in terms of Section 235 as read with Section 120 of the Customs and Excise Act (Chapter 23:02) has made the following regulations.

"The regulations may be cited as the Customs and Exchange (Suspension)(Amendment) Regulations, 2024 (No. 272).

"The Customs and Excise (Suspension) Regulation 2003 published in Statutory Instrument 257 of 2003 (hereafter called the principal regulations) are amended by the repeal of Section 91 (Suspension of duty on cooking oil, maize, milk, sugar, rice, flour, salt, bath soap, laundry soap, washing soap, baking powder, toothpaste and petroleum Jelly) with effect from 1st February 2024."

The gazetting of VAT exemptions on basic goods is a positive move as it increases options for consumers while the Government is trying to manage price escalations, economic analyst Mr Morris Mpala said.

"For businesses, it means they will need to measure up to give value for money on these products to compete with imports through more innovation/creativity," he added.

"On the flip side, it could create pricing challenges for local producers and they could find the going getting tough if these imports are not brought in at a level playing field."

Mr Mpala said local production was still costly when compared to other countries due to numerous challenges and said this could sting some businesses or push some producers to resort to importing to compete, which could adversely affect domestic production.

Early this year, Prof Ncube said the fine-tuning measures were taken after the Treasury constituted a technical committee to receive input from representative members under the umbrella body of the Confederation of Zimbabwe Industries.

The committee undertook an impact analysis on the implementation of some of the measures introduced through the 2024 Budget, in particular with regards to tax compliance en route to the market, mitigation of consequences of the sugar on health through a special surtax and a few tariff lines omitted on exemption from Value Added Tax, to cover the whole value chain that includes cotton and soya seeds to cooking oil.

To ensure consistency in the cooking oil value chain, cotton seed and soya beans and their derivative products will be included in the VAT exemption schedule, while the Special Surtax on Sugar Content on specified beverages has been adjusted to US$0,001/gram and would be effective on the date of gazetting.

Following new Government regulations aimed at boosting value chain efficiency and combating unfair competition from the informal sector, several businesses immediately hiked prices.

The development sparked an outcry from consumers prompting the Government to fine-tune the measures, which meant that businesses were expected also to reduce their prices.

However, there had been resistance from the business sector as there was no law enforcing the directive. However, some retail outlets have been gradually reducing prices. For instance, Bakers Inn, a subsidiary of Innscor Africa Limited yesterday said with immediate effect it has reduced the cost of bread from US$1,10 to US$1 saying the move sends a powerful message to other businesses, urging them to prioritise the needs of their communities. The price of bread has gone up since the beginning of the year in response to VAT charges proposed in the 2024 national budget. This move by Baker's Inn resonates deeply with consumers facing economic hardship. Recognising this struggle, Baker's Inn said it has chosen to be more than just a bakery, as it has become a champion for Zimbabwean families.

This is not the first time the company has stepped up to the plate. In 2023, they initiated a similar price reduction, demonstrating their unwavering commitment to supporting their customers during tough times.

Source - The Chronicle