GOVERNMENT has agreed to exempt agricultural equipment exports from value-added tax (VAT).
“The government agree
d to reclassify agricultural equipment altogether. We can now claim back VAT on input costs for agricultural equipment exports,” Anthony Rowland, the chief executive officer of Zimplow, said.
Rowland said this would reduce costs by 10% and make their exports more competitive.
He said before the introduction of VAT, when there was still sales tax, they did not pay sales tax and therefore their customers were not charged sales tax.
“When VAT was introduced we had to pay it but could not charge it on our customers,” Rowland said.
He said besides export agricultural equipment, government should also exempt VAT on equipment for the local market.
“The local market product is more expensive as compared to imports.”
However, Rowland said the major problem they are facing as manufacturers and exporters was the exchange rate.
“Our problem is that the exchange rate is not going along with the inflation rate,” he said.
There is a large disparity between the foreign currency auction rate and the parallel market rate.
Major currencies like the US dollar and British pound are trading at about 1: $6 200 and 1: $11 700 on the foreign currency action respectively. On the parallel market the US dollar is trading at 1: $18 000 and the British pound at about 1: $25 000.
Agricultural equipment manufacturers have been crying foul over the exemption of VAT on imported equipment.
Steelnet Zimbabwe Ltd said its agricultural implements manufacturing division, Hastt Zimbabwe, was facing viability problems because of the exemption of VAT on imported agricultural implements.
“The categorisation of agricultural equipment as VAT-exempt continues to undermine the competitiveness of locally-manufactured equipment,” said Walter Chigwada, the managing director of Hastt.
Chigwada said the VAT structure was skewed in favour of imported equipment. Steelnet is the holding company of BMA Fasteners, Hastt and Tube and Pipe Industries.
Recently the government banned the export of all plant and machinery used in mining, farming, manufacturing or industry in a bid to avoid de-industrialisation.
The Ministry of Industry and International Trade evoked Section 4 of the Control of Goods (Open General Export Licence) (No 4) (Amendment) Notice 2005 (No 2) prohibiting the export of plant and machinery from Zimbabwe.
However, Rowland said the ban does not affect them.