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. Herald
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