VEHICLE importers will continue to pay duty in foreign currency despite the introduction of the interbank foreign currency market, as Government seeks to promote policy consistency.
This was said by Finance and Economic Development Minister Professor Mthuli Ncube in an exclusive interview with The Herald Business last week.
Prof Ncube’s clarification comes at a time when some vehicle importers and business people have been calling on Government to rethink the duty payment structure for vehicles in tandem with the 2019 Monetary Policy Statement, which among other issues, introduced an interbank market for forex and a local currency called RTGS dollar.
The interbank market started at an exchange rate of 1:2,5 (US dollar to RTGS dollar), but had since risen to 1: 3,0396 as of Wednesday last week.
However, there have been calls for Government to start charging duty on imported vehicles in local currency using the interbank rate equivalent of the value of the vehicle.
But Prof Ncube said the policy on duty payments on imported vehicles, as pronounced in the 2019 Budget, will remain in a bid to promote policy consistency.
“Look, I don’t want to chop and change policies too much. Every other week you change policy because you have this and that; it’s not very good,” said Prof Ncube.
“I am sticking to the payment of duty in forex; basically in the currency someone has acquired the vehicle, it could be in rand, it could be in US dollars, whatever currency you acquire it in, pay in that currency.
“I don’t want to chop and change policy.”
Industrialists have previously complained that incessant policy shifts hurt business, and called for consistency to allow them to plan for the long-term.
While presenting the 2019 Budget, Prof Ncube said levying duty in foreign currency on imported vehicles and other “non-productive goods” was critical to restrict the forex outflows.
Said Prof Ncube: “In order to redirect use of scarce foreign currency to the productive sectors of the economy, the budget proposes that customs duty and all other taxes on imported motor vehicles be levied in foreign currency acceptable as legal tender, with effect from November 23, 2018.”
In the first six months of last year, vehicle imports gobbled US$225 million, representing 23 percent of total imports, compared to US$112 million spent during the same period in 2017.
Vehicle imports have been rising exponentially since 2009 from US$250 million to upwards of US$800 million in 2010.
Some studies have shown that about US$4 billion was blown in vehicle and spare part imports between 2009 and 2016, which prompted Government to take drastic measures such as charging duty in forex.
Government has also indicated that levying duty in forex will help lessen the burden of sourcing the hard currency required to import fuel to power the vehicles.
Mnangagwa is swimming against the tide as he seeks to salvage the country’s fragile economy as well as assert his political legitimacy, eight months after winning a disputed poll by a razor-thin margin.