Zimbabwe faces 15% basic foods price increase with new VAT rules

Basic food prices are set to increase from today onwards as Zimbabwe is set to introduce a 15% value added tax (VAT) on several basic foodstuffs with effect from February 1 2017, following the publication of new legislation.

This amends previous regulations by deleting several items from the list of VAT zero-rated goods, while at the same time including them on the full VAT of 15%.

Some of the items that have been removed from the VAT zero-rated list of goods include but are not limited to potatoes, rice, margarine, mahewu (fermented liquid mealie-meal porridge), meat and fish.

Analysts said the new rules will result in prices going up by 15%.

“Consumers are likely to shift towards informal retailers where the tax collector’s hand is not present,” said local analyst Walter Mandeya, adding that formal outlets are likely to lose out as they will be forced to charge VAT.

All companies with an annual turnover of $240 000 are required by the Zimbabwean law to install fiscal devices in line with value-added tax fiscalised recording regulations.

According to law, all companies were supposed to have fiscalised by January 1 2012. Fiscalised tax registers record sales at the point of sale.

Mandeya said the problem with the Zimbabwean government is that its decision-making is always in the short term and reactionary. fin24