VAT exemptions won’t affect revenue collection

AN economist has said the Government’s projected 2024 revenue derived from taxes will not be heavily impacted by the recent fine-turning of Value Added Tax (VAT) on some basic goods saying instead, more businesses will be energised to pay taxes.

The move, the economist added, will make it easy for the Government to collect more revenue.

Presenting the 2024 national budget last November, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube noted that in line with the projected economic growth of 3,5 percent this year, total revenue collections in 2024 are estimated at $53,9 trillion or 18,3 percent of the GDP.

Almost all $51,2 trillion would be tax revenue. Expenditures are projected at $58,2 trillion.

On revenue-enhancing measures, Minister Ncube proposed taxation of the micro and small enterprises and licensing of traders to restore the supply chain from the manufacturer to wholesaler and retailer.

Under the measure, only licensed and tax-compliant operators would procure goods from manufacturers and wholesalers.

This was meant to provide a major incentive for the informal sector to regularise, but without the tax authorities having to spend any money on enforcement.

The outlined measures briefly kicked in last week with several business entities advising customers of price increases for certain products.

That quickly raised an outcry.

This week, Prof Ncube announced that the 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 VAT, eliminating the fears of price increases that had gripped consumers.

Retailers can buy from manufacturers, provided they are tax-compliant and manufacturers can sell to informal traders.

The standard VAT has been increased to 15 percent effective January 1, 2024.

Development economist Dr Prosper Chitambara told Business Chronicle yesterday that the latest Government move will incentivise more businesses to be tax compliant, generating more revenue for the Government.

“If anything, the latest move will result in the Government getting more revenue than it would have raised under the original measures. The idea is that by reducing the tax burden, you are incentivising people to comply. The move will make it easy for the Government to collect revenue,” said Dr Chitambara.

“I don’t think the Government will craft other measures. The tax burden is already on the high side, I think they have reached a limit. An economy thrives in an environment where the tax regime is less burdensome, with fewer tax heads and lower taxes. They are good for the economy and doing business and good for the consumer,” he added.

Last weekend, the Government met with Confederations of Zimbabwe Industries (CZI) representatives and came up with a moratorium on various issues.

In a notice to members, CZI chief executive officer Sekai Kuvarika said: “As business, we met with Government this morning (Saturday) to receive feedback on the various submissions we have made on the Finance Act as well as SI 249 of 2023 and SI 248 of 2023 and a moratorium was given.

“We are pleased to advise that the Government has provided a moratorium so business can continue to trade on the basis of December 2023 conditions while the engagements are being finalised.”-chronicle