Business Zimbabwe

Retailers defy VAT directive

Professor Mthuli Ncube

Enacy Mapakame, Business Reporter

Some businesses across the country are yet to comply with Government’s directive to reduce value added tax (VAT) to 14,5 percent.

Last year, Treasury ordered the reduction of VAT by 0,5 percent, but receipts from some retail outlets show the tax is still pegged at 15 percent.

Confederation of Zimbabwe Retailers Association (CZRA) president Denford Mutashu acknowledged some members were yet to comply.

He said stakeholder consultations were ongoing to assist business with full implementation.


“Compliance at the moment is still minimal,” he said.

“We are still at the beginning of the year, but our approach is to engage the whole value chain and we have a lot of tax experts coming in to help us with implementation of the process.”

In the 2020 National Budget, Finance and Economic Development Minister Professor Mthuli Ncube announced a raft of tax relief measures to help cushion consumers.

The tax relief measures were effected on the 1st of January this year.

By law, the directive is enforceable as the National Budget was presented and passed by Parliament.

“Notwithstanding that Value Added Tax legislation provides for exempt and zero rated products to ensure affordability of basic goods and services, aggregate demand on standard rated goods has, however, shrunk mainly due to low disposable incomes,” said Minister Ncube when he presented the Budget.

“In order to stimulate aggregate demand, I propose to reduce the VAT standard rate from 15 percent to 14,5 percent, with effect from 1 January.”

Mr Mutashu said improvements in level of compliance should begin to reflect at the end of this month.

He said while the reduction of VAT was a marginal decline, it was a step in the right direction to stimulate ease of doing business.

“It is also important for every business to comply with the tax payments and directives while Government also continues on this path of creating tax incentives,” said Mr Mutashu.


Commenting on the country’s tax situation, National Business Council of Zimbabwe (NBCZ) president Langton Mabhanga indicated the country was still heavily taxed.

He said the marginal reduction in VAT, though a good incentive, was outweighed by the high cost structure of production and the inflation rate.

“Our taxation is currently heavy due to multiplicity of taxes,” said Mr Mabhanga.

“If you look at the price of fuel, it is reasonable, but the cost build up is high, which makes it expensive.

“Too many high taxes increase the cost build up and it’s not good for an economy that wants to grow.

“If taxes are reduced, there will be an incentive to pay and the taxman will enjoy economies of scale.”