Treasury fine tunes measures on basic food items

Treasury has fine-tuned some of the measures introduced through the 2024 National Budget, with basic food items such as bread, milk, cooking oil, and maize meal, exempted from Value Added Tax, eliminating the fears of price increases that had gripped consumers.

Other basic commodities such as meat, rice, bath and laundry soap, washing powder, toothpaste and petroleum jelly have been moved to standard rating, which means price increases should be minimal.

The measures were announced last night by Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, following concerns that they could have unintended consequences.

Prof Ncube said the measures have been taken after 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, in order to cover the whole value chain that includes cotton and soya seeds to cooking oil.

Prof Ncube said the findings of the technical committee have since been presented, hence the decision by Treasury to fine-tune the measures enshrined in the Finance Act and subsidiary legislation.

Retailers are now able to buy straight from manufacturers as long as they have obtained a valid tax clearance certificate and are VAT registered.

And manufacturers have been allowed to sell to institutions such as hotels only if the clients are registered for VAT.

To ensure consistency in the cooking oil value chain, cotton seed and soya beans and its 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.

In terms of the route to market, Prof Ncube said taking into consideration the need to preserve some of the pertinent arrangements for delivery of goods into the market efficiently, the legislation will be fine-tuned in a way that allows retailers to purchase from manufacturers as long as they have obtained a valid Tax Clearance Certificate, and are VAT registered.

“Manufacturers are permitted to sell to institutions such as hotels, schools and other corporates, provided such clients are registered for VAT and possess a valid Tax Clearance Certificate,” he said.

“In order to protect the quality of goods and safety of consumers, perishable products that include bread and milk products will be distributed by manufacturers directly to retailers.”

Prof Ncube said concern was raised with regards to survival of rural traders since they are not registered for tax purposes.

Such traders will continue to purchase their goods from the wholesalers, hence there will be no disruption of trade.

“Manufacturers will also supply direct to small traders in the rural areas. Where the manufacturer distributes directly to customers who are not registered for VAT, are not in possession of a valid VAT certificate and also not registered for Income Tax purposes, a 5 percent Withholding Tax shall apply.

“Companies that serve online customers are allowed to continue to transact using this method provided they are fiscalised so as to guarantee compliance to the Value Added Tax; and in the interest of promoting an environment conducive for healthy and efficient tax collection, local authorities are urged to issue vendors with licences that are linked to the place of business,” said Prof Ncube.

In terms of the special surtax on sugar content, Prof Ncube said cognisant of the need to build volumes, the special surtax on sugar content on specified beverages has been adjusted to US$0.001/gram and will be effective on the date of gazetting.

“For the avoidance of doubt, the Special Surtax will apply on added sugar only. In addition, given the possibility of substituting sugar with sweeteners, these will be deemed as sugar for tax purposes.

“As revealed through the consultation process, the increase in price of the beverage products should be modest, hence the tax is not expected to disrupt the market,” he said.

In order to ensure consistency in the cooking oil value chain, Prof Ncube said cotton seed and soya beans and its derivative products will be included in the VAT exemption schedule.

He added that Treasury’s attention had been drawn to the impending increases in prices of the basic commodities, as a result of the re-arrangement of the Value Added Tax system where some of the goods have moved from zero rating to exemption, in line with regional practice and in the interests of revenue to the fiscus.

Other products exempted from Value Added Tax purposes are salt, sugar and flour, which means their prices will not be increased.

Prof Ncube said a statement that purports to grant a moratorium by Government on the implementation of the Finance Act, as well as subsidiary legislation obtained under Statutory Instruments 248 and 249 of 2023, has been widely circulated.

“The legislation that is purported to have been granted a moratorium pertains to the route to the market, VAT zero rating and exemption and special surtax on sugar.

“For the avoidance of doubt, the Ministry of Finance, Economic Development and Investment Promotion does not relay information through third parties, hence advices of the above steps that will be taken as a consequence of the consultation process,” he said.

Prof Ncube said his ministry thanked stakeholders on their valued contribution to the process that has resulted in the fine-tuning of the measures introduced through the 2024 National Budget.


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