CONFEDERATION of Zimbabwe Retailers (CZR) is calling for the reconsideration of the proposed value added tax (VAT) on basic commodities saying that the initiative will contribute to many people becoming food insecure and will further informalise the economy.
During the presentation of the 2024 National Budget, Finance, Economic Development and Investment Promotion Minister Mthuli Ncube proposed that only traders registered for VAT purposes and in possession of valid Tax Clearance Certificates be eligible to procure goods from manufacturers.
He further proposed to review downwards the VAT registration threshold to US$25 000, or local currency equivalent, with effect from 1 January 2024 and he said enterprises that meet the above threshold should, thus, register and account for VAT, failure of which applicable penalties will be invoked.
It is in this background that CZR president Mr Denford Mutashu said the initiative will affect the general populace.
“The Finance Minister Mthuli 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.
“CZR has however noted with concern the proposal to introduce VAT on various basic commodities. Given our current gross domestic product per capita, we cannot have VAT on these,” said Mr Mutashu, in a statement yesterday.
“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.”
He said this will contribute to most basic commodities being smuggled from South Africa as basic commodities are exempt from VAT in SA and the resultant effect will be the export of jobs to the neighbouring country.
He added that this is important given the impending drought and expected shortages of grain worldwide.
“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 said.
“Mr Mutashu however commend the proposed policy by Minister Ncube to restore sanity on supply chains by making manufacturers sell only to registered operators.
He said there is a need to have a coordinated and well-structured formalisation strategy and 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 therefore implore the Government to come up with a tried and tested presumptive tax system.
“We appreciate Minister Ncube’s willingness to engage stakeholders and we also trust that the proposal will not be adopted in the interest of all stakeholders,” he said.
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