BAD NEWS: Zimbabwe businesses pass on new tax burden to customers

Finance and Economic Development Minister Professor Mthuli Ncube in one of the supermarkets in Bulawayo yesterday.

As the new year gets underway, Zimbabweans are bracing for a rise in costs thanks to tax changes sneaking into effect. Major retailers are alerting customers that prices on essential goods will be climbing due to a higher value-added tax (VAT) rate.

Businesses large and small are rushing to get their financial houses in order as the Zimbabwe Revenue Authority (Zimra) ramps up regulations on 1 January. The standard VAT levy is nudging up from 14.5% to 15%, which many see as just the first domino to fall.

Chicken franchise Texas Meats broke the news to patrons that meat products would see a VAT premium tacked on. “businesses pass on new tax burden to customers,” a company statement explained. Other commodity giants like Delta Beverages and Koala Park are following suit.

Meanwhile, informal traders are in the crosshairs as Zimra clampdowns on the shadows. To buy over US$1000 worth of goods within 30 days now demands tax registration. Wholesalers are instructed only to sell to licensed retailers, tightening oversight.

Enock Rukarwa of investment group Apex Securities warns these tax tweaks may backfire.

“The most direct impact is an increase in the prices of goods and services, which ultimately leads to reduction in consumer purchasing power. Given our highly informalised economy, this measure may increase informalisation as businesses avoid taxation,” Rukarwa said.

For Zimbabwe’s struggling populace, a new year of financial pain may be on the horizon. Only time will tell how citizens and the economy adjust to the government’s well-intentioned but challenging reforms.

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