Zimbabwe faces 15% food price hike under new VAT rules

Zimbabwe Independent

Zimbabwe is set to introduce a 15% value added tax (VAT) on several basic foodstuffs with effect from February 1 2017, following the publication of new legislation.

This amends previous regulations by deleting several items from the list of VAT zero-rated goods, while at the same time including them on the full VAT of 15%.

Some of the items that have been removed from the VAT zero-rated list of goods include but are not limited to potatoes, rice, margarine, mahewu (fermented liquid mealie-meal porridge), meat and fish.

Analysts said the new rules will result in prices going up by 15%.

“Consumers are likely to shift towards informal retailers where the tax collector’s hand is not present,” said local analyst Walter Mandeya, adding that formal outlets are likely to lose out as they will be forced to charge VAT.

All companies with an annual turnover of $240 000 are required by the Zimbabwean law to install fiscal devices in line with value-added tax fiscalised recording regulations.

According to law, all companies were supposed to have fiscalised by January 1 2012. Fiscalised tax registers record sales at the point of sale.

Mandeya said the problem with the Zimbabwean government is that its decision-making is always in the short term and reactionary.

“Only last year through (regulations)… most of these items were removed from VAT zero-rated goods. They were fully exempt from paying VAT, but a few months down the line they are now paying full VAT.

“Imagine, all operators who exclusively supply the exempt goods and services were told to apply for deregistration but now have to register again,” said Mandeya.

The new measures are also likely increase strain on already burdened consumers in a country where aggregate demand has significantly dropped.

The country’s biggest beverage producer, Delta Beverages, is currently operating at between 40% and 60% of its capacity due to a decline in demand for its products witnessed since 2013.-Fin24

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