CZR slams Finance Minister over VAT on basic commodities
The Confederation of Zimbabwe Retailers (CZR) has expressed strong opposition to Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube’s proposal to introduce Value Added Tax (VAT) on basic commodities.
The retailers lobby group argued that the new decision will disproportionately impact negatively on the poor and further informalise the economy.
In a statement CZR chairman, Denford Mutashu, claimed the potential disastrous consequences of the policy by Mthuli would go a long way in disfranchising the emerging businesses and the people in general.
“Given our current GDP (Gross Domestic Product) per capita, we cannot have VAT on these. 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,” said Mutashu.
CZR’s concerns are multifaceted. It argues that the VAT proposal will exacerbate food insecurity.
With an impending drought and global grain shortages looming, making basic necessities like food more expensive could push more Zimbabweans into hunger.
Mutashu said consumers seeking cheaper alternatives may turn to smuggled goods from South Africa and other places, where VAT on basic commodities is exempt. This would cripple formal businesses and export jobs.
The complex and costly compliance burden associated with VAT could discourage businesses from entering the formal sector, hindering economic growth.
Instead, Mutashu proposes a focus on eliminating the 10 percent exchange rate cap. This would level the playing field for formal businesses, boosting tax revenue across the board.
He added that requiring manufacturers to sell only to registered operators will combat leakages and increase tax capture.
A low-rate, easy-to-comply-with system will encourage broader tax compliance and reduce the burden on existing taxpayers.
Mutashu commended Mthuli’s willingness to engage stakeholders but urged him to reconsider the VAT proposal in the interest of all Zimbabweans.
He said focusing on formalisation, simplifying the tax system, and creating a level playing field would ultimately generate more sustainable revenue for the Government and lift Zimbabweans out of poverty.
The debate over VAT on basic commodities is likely to continue in the coming weeks as the Government finalises its budget proposal. CZR’s strong stance reflects the concerns of many Zimbabweans who fear the regressive impact of such a policy.-businessweekly
