The ManicaPost
Ray Bande
Senior Reporter
INDUSTRY plunged into panic mode early this week after rice retailers and suppliers were asked to pay Value Added Tax (VAT) backdated to 2017, The Manica Post has learnt.
Rice was exempted from paying VAT in 2017 by the then Finance and Economic Development Minister, Patrick Chinamasa.
However, suppliers and retailers of rice packages weighing 25kgs or less have received requests for VAT payment backdated to 2017.
The Manica Post understands that the move is aimed at supporting the local packaging industry through promoting re-packaging of cheaper bulk rice into smaller units.
However, if the VAT charged on the commodity sails through, the projected 14,5 percent increase in the price of the product will be pushed to the consumer.
In a letter addressed to Delloitte and Touche, the Permanent Secretary in the Ministry of Finance and Economic Development, Mr George Guvamatanga, rejected the retrospective exemption of VAT on rice for packages of 25kgs or less.
He went on to advise the firm’s client to approach Zimra with a payment plan for the backdated VAT.
The letter reads in part: “I write with reference to your request for Treasury to exempt VAT with effect from February 1, 2017 to enable Zimra to reverse your client’s tax liability arising from failure to charge and collect VAT on rice in packages of 25kgs or less.
“Treasury appreciates your concerns over the financial burden that may result from collection of the outstanding tax. You will, however, appreciate that the re-classification of rice and packages of 25kgs or less had a public policy objective.
“More specifically the measure was aimed at supporting the local packaging industry through promoting re-packaging of cheaper bulk rice into smaller units. Furthermore, legislation to give effect to the measure was promulgated timely and taxpayers had an opportunity to seek clarity or raise concerns over any omissions with Treasury.
“In view of the above, your request for a retrospective exemption of rice in packages of 25kgs or less is therefore rejected. Your clients should thus approach Zimra for a payment plan.”
Mr Henry Nemaire, the chairman of the Confederation of Zimbabwe Industries (CZI)’ committee on trade development and investments promotion said Government should seriously re-consider the move.
“This move has the potential of ruining the industry’s cash-flow as the amounts being claimed run into millions. Most importantly, consumers will also feel the pinch as industry will pass this burden to the old woman in Sakubva,” said Mr Nemaire.
“The Minister of Finance and Economic Development, Professor Mthuli Ncube, should zero rate rice (exempt it from paying value added tax), which is a basic food item. This should be done in retrospect.
“Zimbabwe consumes about 200 000 tonnes of rice per annum. This policy inconsistency on rice will go into our history books. In 2004, suppliers of rice were being charged 15 percent VAT. In 2008, it was zero rated. In 2017 the 15 percent VAT was back for two weeks (1 February to 15 February), before the then Minister Chinamasa exempted it again.
“Fast forward to 2020 and now only bulk rice is exempted while 14,5 percent VAT is charged on smaller packs.
“Such policy inconsistency will discourage investments in the sector. The VAT on rice will reverse the price stabilisation measures put in place by Government,” he said.
Mr Nemaire highlighted that most countries in the region exempts rice from VAT.
In South Africa, the basic food stuffs that are zero-rated include brown bread, maize-meal, samp, mealie rice, dried mealies, dried beans, lentils, tinned pilchards, milk powder, dairy powder blend, rice, vegetables, fruit, vegetable oil and eggs, among others.
In a separate interview, Consumer Council of Zimbabwe executive director, Ms Rosemary Siyachitema bemoaned the imposition of VAT on basic commodities such as rice.
“It is sad that we are now imposing VAT on rice when it is a suitable alternative to the staple maize meal.
“Industry will obviously pass the costs on to the consumer who is already struggling to put food on the table.
“Policy makers should do the right thing by exempting rice from VAT so that it remains relatively affordable to the general public,” said Ms Siyachitema.
