VAT on basic goods - Ministerial Statement to Parliament (7 Feb 2017)

EXTRACT FROM NATIONAL ASSEMBLY HANSARD FOR 7th FEBRUARY 2017

MINISTERIAL STATEMENT

CURRENT STATUS OF VAT ON BASIC GOODS

THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHINAMASA): Mr. Speaker Sir I crave the indulgence of the House to issue a Ministerial Statement. The Ministerial Statement is concerning the current status of the VAT on basic goods.

 Mr. Speaker Sir, you will recall that in the 2017 National Budget, I proposeD to introduce VAT at a standard rate of 15% on products which include rice, margarine, cereals, maheu, potatoes, meat (pork, beef, fish and chicken).  The basis for standard rating the products is mainly due to the need to rationalise the schedule of zero rated and exempt goods in order to broaden the tax base and minimise the cost of tax administration.

Mr. Speaker Sir, Zimbabwe, together with other SADC Member States, has ratified the SADC Protocol on Finance and Investment.  Under the Protocol, Member States are mandated to harmonise taxation matters and coordinate tax regimes.

In an endeavor to harmonise taxation matters, the SADC region has developed VAT guidelines which enable Member States to sustain and enhance tax revenues on an equitable and efficient basis.

Member States have, thus, agreed that the list of zero rated and exempt products should be streamlined in order to achieve the following objectives:

Broaden the tax base;

Enhance revenue generation;

Promote administrative efficiency;

Minimise corruption

Ensure similarity among Member States; and

Enhance equity and fairness among others.

Mr. Speaker Sir, in the SADC region, Zimbabwe has one of the longest list of zero rated and exempt products.  The list of zero rated and exempt products include, but not limited to the following:

·       Grains such as maize and wheat;

·       Mealie meal;

·       Bread;

·       Cooking oil;

·       Salt;

·       Milk;

·       Fruits;

·       Vegetables;

·       Eggs;

·       Inputs for manufacture of cooking oil;

·       Soya beans;

·       Protective clothing;

·       Animal feeds and remedies;

·       Pesticides;

·       Fertilizers;

·       Medical services;

·       Selected pharmaceutical products;

·       Domestic supply of electricity;

·       Domestic supply of water; and

·       Supply of goods such as books, typewriters and maps for use by physically challenged persons, among others.

 

Countries such as Namibia, Lesotho, Malawi, and Zambia have a minimum list of zero rated and exempt products.  Such countries charge VAT on products such as rice, fresh milk, fruits, eggs and meat products among others.

However, in our circumstances, following the debate that took place here and stakeholder representations, wherein concerns have been raised regarding potential informalisation due to perceived price increase, I propose to shelve the implementation of Statutory Instrument 20 of 2017, which levies VAT on potatoes, rice, margarine, maheu and meat products. 

This will allow for further consultation with relevant stakeholders and those consultations, I will start them with this august House.  I need the august House to give me guidance.  I must tax something to raise money to pay for service delivery, allowances, and wages.  So, we need to have guidance so that we understand and agree on which items to tax.  So, the consultations will start with this august House.  I thank you

[MPs then sought clarification from the Minister on certain points]

MINISTER’S RESPONSE TO REQUESTS FOR CLARIFICATION

Thank you very much for the contributions and for the clarifications sought.  Hon. Sibanda, if the Statutory Instrument imposed VAT on fish and kapenta is fish, I am shelving it as per my statement.  Hon. Mudzuri, thank you very much, this covers all types of beef.  I cannot say off hand whether tinned beef is part of that.  I doubt it, I think tinned beef should be different but all we are looking at is what did the instrument cover.  Anything that was covered which was to take effect from 1st February, 2017 will now be shelved.

Hon. Nduna, I think I have to explain this VAT.  As you know, VAT is a transactional tax.  It is charged at every level of value addition.  In other words, if we take the example of a manufacturer, when the manufacturer sells to the wholesaler, he charges VAT.  When the wholesaler sells to the retailer, the wholesaler charges VAT and when the retailer sells to the consumer, he charges VAT.  This is why VAT is now the largest source of our revenue in terms of support to the budget revenues.  It accounts for a very huge contribution to our revenue collection.  Seconded, I think by Pay As you Earn.  So, when we are looking for how to raise money, we are basically identifying those areas where there is a lot of economic activity.

A supermarket will fix its price, in the prices they do not include tax.  You only know the tax when you get to the till.  So, this issue about prices being increased, it is not seen in the shops but when you get to the till because of the VAT.  If a retailer includes a VAT tax in the price, you can be sure that money is not coming to ZIMRA.  It is getting into the coffers of the supermarket and that is not desirable.

I want to thank all of you who have contributed.  Hon. Mnangagwa, kwashiorkor had not come yet.  It was only introduced on 1st February, 2017 and I think if you have not been buying meat, you cannot blame the tax.  Mr. Speaker Sir, I thank Hon. Members and I hope that I have done justice to the clarification sought.

 

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