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Happiness Zengeni
GOVERNMENT yesterday introduced a raft of changes to various duty and tax regimes in order to stimulate local production capacity on the one hand and ensure availability of basic commodities on the other.
Presenting the 2012 budget yesterday, Finance minister Tendai Biti scrapped customs duty on selected raw materials used in local manufacturing until such time as local production of the same improves in line with economic growth.
Biti suspended the 5% customs duty on soya meal and crude soya meal. There is currently a national shortage of soya, with production at 20 000 tonnes against a demand of 200 000 tonnes.
The suspension of duty is likely to reduce the price of products such Olivine cooking oil, whose manufacturers had resorted to importing soya oil and bottling it at a much higher cost.
The Finance minister introduced a 5% customs duty on wheat flour to enhance the viability of the milling industry as well as encourage local production of wheat.
He said pre-packed rice, flour and salt would be charged at between 5-15% but bulk quantities would not be charged.
Imported fresh farm produce such as potatoes, tomatoes, onions and shallots, cabbage, carrots, peas, beans, mushrooms and spinach would attract a 25% duty rate, in order to promote local production.
The duty, would however be suspended during seasons when local production is insufficient to meet demand.
Clothing manufacturers would receive duty rebate on imported raw materials for use in the manufacture of clothing, provided that the raw materials are not in production locally. This would take effect from January 1, 2012 and would be extended to manufacturers registered with the National Employment Council.
“The clothing industry provides an opportunity to grow the economy through the resuscitation of the value chain in the production of clothing, since it is a labour- intensive business requiring relatively little capital,” Biti said.
The duty rate on clothing was adjusted to 40% and an additional US$3 on any extra kg, up from 40% and an additional US$1, 50 per kg.
The minister removed clothing from the list of items on the travelers’ rebate.
However, clothing and textiles manufacturers said that the issue was not the duty per se but that measures have to be enforced at the borders so that there is zero tolerance of smuggling. Biti acknowledged the corruption at border posts, including bribery of customs officials, which has led to revenue leakages.
Biti also reduced customs duties on imported raw materials such as PVC sheeting, PVC-coated sheeting, polyurethane sheeting, reflector materials, tea bag paper, copper tubing, foil, waste sulphuric acid, some vegetable saps and extracts and some cleaning substances. Duty on polyethylene granules and sulphur was also scrapped.
Excise duty on local cigarettes was increased to US$10 for every 1000 sticks from US$7, while imported cigarettes would be levied at 40% plus US$7 per 1 000 sticks from 40% plus US$5 with effect from December 1.
Biti said that capacity in the cigarette-manufacturing sector had increased to 90% in 2011, with volumes rising to an estimated 1, 8 billion sticks.
However, Biti’s move was driven by the low price structure of locally-manufactured cigarettes compared to prices obtaining in the region, which provided an opportunity for illicit cross-border trade.
Biti also added that government is aiming at discouraging consumption of the hazardous and addictive product, at the same time raising revenue to redress associated social costs.
BAT has in the past said that the group makes excise gains for the first 7 months of the year but generally Zimbabwe’s excise potion at 18% was much lower than that of South Africa at 37%.
Duty on galvanised wire, cold rolled steel coils and selected angles of iron or non-alloy steel was reduced by half to between 5-10%.
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