Mthuli move on retailers lauded

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, last week made strides towards taming a sprawling informal retail sector as he proposed limiting stock procurement to licensed and Tax Compliant Operators to restore a functional supply chain from manufacturers, wholesalers and retailers.

Calls against the sprawling informalisation have been growing louder lately as the formal retail sector increasingly feels the pinch of the emergent informal economy in the country.

Big retail players from different segments of the economy encompassing food, clothing, textile, and footwear sectors have fallen victim to the sprawling informal sector and have since exhorted the government to bring the situation under control.

However, to sanitise the almost out of control situation where manufacturers were bypassing wholesalers, supplying directly to informal retailers, Mthuli suggested a new framework where traders will only be permitted to buy merchandise from manufacturers only if they have the requisite licenses and were tax compliant.

As such, traders who registered for VAT and carry valid tax clearance certificates, will be the only ones allowed to participate in trade with manufacturers.

Also, with effect from the 1st of January 2024, the VAT registration threshold will be reduced from US$40,000 to US$25,000.

According to analysts, the move will ensure that a significant number of retailers are compliant with VAT and tax obligations, in this manner, it will pave the way for a clearer and more accountable supply chain within the retail sector.

“To restore the supply chain from the manufacturer, wholesaler to retailer, I propose that only licensed and Tax Compliant Operators procure goods from manufacturers and wholesalers.

“I, further, propose that only traders registered for VAT purposes and in possession of valid Tax Clearance Certificates be eligible to procure goods from manufacturers,” said Mthuli while presenting the 2024 National Budget Statement a fortnight ago.

He alluded that the exorbitant registration threshold was limiting micro and small enterprises from abiding by registration for VAT purposes.

“Operators with a minimum annual turnover of US$40 000, or local currency equivalent thereof, are required to register for Value Added Tax. I, therefore, propose to review downwards, the VAT registration threshold to US$25 000, or local currency equivalent,” added the Minister.

However, according to analysts, there is a higher probability that informal retailers will evade the proposed framework by continuing to import products rather than paying the VAT registration threshold of US$25,000.

The likelihood of evasion of the proposed US$25,000 registration is more likely given the penetrability of the country’s border areas.

Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, said the move will extensively encourage operators to be tax compliant.

“We commend the proposed policy by Finance Minister Mthuli Ncube to restore sanity to supply chains by enforcing manufacturers to sell only to registered operators. We feel 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 therefore implore the government to come up with a tried and tested presumptive tax system,” Mutashu.

Earlier in the year, the Government indicated that it would move swiftly to address distortions manifesting within the supply chain whereby manufacturers are directly delivering goods into the informal sector, threatening the viability of wholesalers.

Industry and Commerce Minister Dr Sithembiso Nyoni, said if the government does not address this trend, it will foment chaos within the commerce segment.

“We are putting order in the commerce sector by ensuring that manufacturers deliver to wholesalers and these are accessed by retail rather than what is happening now, whereby companies deliver to the informal sector.

“That is distorting that value chain. If we do not address that, we are killing the wholesalers and bringing chaos to the market,” she said.

She said the value chain creates jobs and order, and that is the policy of the government.

“Manufacturers understand this, and together we will correct this and ensure we address the distortions that are happening right now,” she said.-ebusinessweekly