Anxiety over duty-induced price increases

09 Nov, 2014 - 06:11 0 Views
Anxiety over duty-induced price increases

The Sunday Mail

THE local market continues to fret that the general increase in import duties, especially after the gazetting of Statutory Instrument (SI)148 of 2014, will likely have ripple effects on the price of local commodities, in an environment where disposable incomes continue to dwindle worsened by the tight liquidity conditions.

Some of the duty increases took effect at the beginning of this month.

Through the mid-term fiscal policy review announced September 11 2014, Government announced a raft of interventions to counter the effects of a disproportionately increasing import bill relative to shrinking exports.

For example, motor vehicle imports accounted for 10 percent of the US$4 billion import bill recorded during the first half of the year.

The toll of the new duty structure is now telling.

Duty for passenger motor vehicles with an engine capacity of up to 1 500cc has since gone up to 40 percent from 20 percent, while double cabs now attract 60 percent in customs duty from 40 percent.

Single cabs and panel vans of a payload exceeding 800 kilogrammes but not exceeding 1 400 kilogrammes now attract 40 percent from the previous 20 percent.

The Zimbabwe Revenue Authority (Zimra) contends that the overall duty paid for motor vehicles will exceed 100 percent in most cases, as it will be calculated using Value for Duty Purposes (VDP) which encompasses cost, insurance and freight value plus other incidental charges and expenses incurred in the purchase of the vehicle and its subsequent transportation up to the first port of entry.

Other charges added on the VDP include port handling charges, storage charges and other special handling fees.

According to the duty schedule released by the tax collector, a 2005 sedan with an engine capacity of 1 495cc and a value of US$4 000 will now attract total duty of US$4 472.

The amount, according to Zimra, will encompass duty of US$2 090, surtax of US$1 300 and Value Added Tax (VAT) of US$1 092.

A 2001 sedan with an engine capacity of 1 800cc worth US$5 000 will now attract total duty of US$5 074.

The punitive regime is not only limited to vehicle imports as a 40 percent surtax on commodities such as dible meat offals and dairy produce, vegetables and miscellaneous edible preparations, beverages, mineral products, perfumes, cosmetics, soap and furniture took effect on October 1.

Government hopes that a tariff increase will help the local manufacturing sector recover.

Local industry, which requires more than US$5 billion to retool and resume full-scale operations, is still undercapitalised.

Buy Zimbabwe chief executive officer Mr Munyaradzi Hwengere says industry has to focus on the interests of consumers.

“As Buy Zimbabwe, we welcome the move by Government to revive local production by discouraging the importation of consumptive products that do little to generate wealth and create jobs.

“At present 70 percent of our imports are channeled to consumption. . .

“At the end of the day, Zimbabwe has to choose whether it wants to be a nation of beggars or producers.

“So far indications are that we are interested in becoming masters rather than slaves,” said Mr Hwengwere.

Market watchers believe the new duty structure will allow Government to effectively fund its operations.

“Taxation generates the revenue needed to finance Government’s economic development policies and creates a framework for development of private sector activities.

“Our view is that the shrinking tax base in Zimbabwe is a major cause for concern as it points to weaker economic activity ahead.

“The scarcity of internally generated resources to fund key productive sectors of the economy will worsen the Government’s balance sheet position,” said MMC Capital.

Confederation of Zimbabwe Industries (CZI) president Mr Charles Msipa opines that Government’s interventions will restore the value of locally produced products.

“The new duty structures on imports on a variety of finished products are exceptional measures to deal with an exceptional set of circumstances, namely: the decline in industrial capacity utilisation and domestic value-addition.

“The majority of products that are covered are locally produced and available and with the concerted and coordinated action of all stakeholders, the measures should curb the influx of non-essential imports and promote greater levels of domestic value-addition and a more sustainable balance of payments position,” said the CZI president.

Government, through the 2014 National Budget, said imports were negatively affecting the agricultural sector and recovery of local industry.

“ . . . although Government has been implementing a tariff regime that endeavours to balance the sustainability of our balance of payments and support the competitiveness of the local industry, imported goods, however, continues to surge, amounting to about US$3 billion for the period January to June 2014.

“The bulk of the imports are finished products, most of which are already produced locally.

“These include cooking oil, poultry, soap, maize meal, flour, beverages, dairy produce, furniture, sugar, fresh and canned fruits and vegetables, among others,” noted Treasury in the 2014 National Budget.

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