DT Correspondent
Harare : Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu has expressed concern over Finance Minister Mthuli Ncube’s proposal to introduce Value Added Tax (VAT) on various basic commodities.
CZR warns that implementing such a policy would have disastrous consequences for the country’s poor, exacerbating food insecurity and leading to further informalisation of the economy.
In response to the proposed balanced budget proposal, which aims to increase fiscal revenue for economic development and expand social safety nets, CZR said that VAT should not be imposed on basic commodities, considering Zimbabwe’s current GDP per capita.
Mutashu points out that even high-income countries do not apply VAT to these essential goods.
He further emphasizes that the introduction of VAT on basic commodities would lead to increased smuggling from neighboring South Africa.
“Most basic commodities will be smuggled from South Africa as basic commodities are exempt from VAT in SA and the resultant effect will be the export of jobs to SA.
“This is important given the impending drought and expected shortages of grain worldwide”
Mutashu maintains that such a policy would disproportionately affect vulnerable populations and hinder efforts to combat poverty.
Instead of implementing VAT on basic commodities, CZR recommends maintaining the current status quo on zero-rated and exempt supplies.
However, the organisation proposes shifting the focus to eliminating the 10 percent exchange rate cap, which would enhance the competitiveness of formal businesses.
“This will have a positive effect on the fiscus as a result of increased revenue on all tax heads.
“We commend the proposed policy by Finance Minister Mthuli Ncube to restore sanity on supply chains by enforcing manufacturers to sell only to registered operators.
“We feel there is a need to have a coordinated 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,” he said in a statement.
