Brace for higher prices as Govt targets small businesses for tax collection

Consumers should brace themselves for higher prices as the government focuses on small businesses for tax collection after Finance and Economic Minister Professor Mthuli Ncube proposed lowering the Value Added Tax (VAT) threshold from US$40 000 to US$25 000, requiring operations that meet the limit to pay VAT or face penalties.

This means small businesses or those operating informally may have to raise their prices or the cost of doing business in order to collect and accommodate VAT.

This will in turn also affect consumers who may have to pay more for goods or services rendered by small businesses.

The finance minister stated in his 2024 National Budget statement that operators with a minimum annual revenue of US$40 000, or the equivalent in local currency, pay VAT; noting that however the “high registration threshold” prevents micro and small enterprises from registering for VAT purposes.

“Consequently, the Tax Administration’s capacity to capture revenue generated through the entire value chain is weakened.  I, therefore, propose to review downwards the VAT registration threshold to US$25 000, or local currency equivalent, with effect from 1 January 2024,” proposed the finance minister.

“Enterprises that meet the above threshold should, thus, register and account for VAT, failure of which applicable penalties will be invoked.”

Meanwhile, Mt. Pleasant legislator, Fadzai Mahere said the attack on small businesses in the new national budget is staggering. 

“In simple terms, this means that any small business that makes an average of $2 100 per month or more will now have to register for VAT.  The impact on a small business is that they will now have to increase the cost of their goods by 15 percent to enable them to collect the VAT,” Mahere said.

“The impact on a consumer is that the cost of goods will go up by at least 15 percent to accommodate this tax. The impact overall is that demand will go down because the prices are too high.”

Mahere predicted that spending may go down and Zimbabwe’s  economy will “become even more comatose than it is now.”

“The VAT tax rate is at 15 percent despite calls from businesses for it to come down to 14.5 percent.  In a country where unemployment exceeds 85 percent, it is grossly irrational to propose a budget that taxes those trying to run a small business for survival. The entire budget is anti-people. It’s a mess,” she said.

Congress for Transformation (CFT) spokesperson, Iphithule Maphosa, added that it was worrying how the Zimbabwean government was heavily taxing its citizens and businesses.

“Any one who still has hope of a dignified life for Zimbabweans clearly does not know Zanu PF looters disguised in government suits. The Zimbabwean government in its economic bankruptcy thinks it can tax the country to prosperity. The government is really a depiction of a man standing in a bucket and trying to lift himself up by the handle,” Maphosa said.

“Instead of creating an environment conducive for investment then deduct taxes therefrom, the government, through Mthuli, decides to tax citizens dry, with almost every aspect of our lives now being taxed. We are going to be taxed for buying a coke, travelling out of town, owning a home, buying, registering and driving a car, applying for a passport, receiving Covid-19 relief allowance.”

Maphosa criticised the government for an absence of proper tax sources such as investments, both internal and foreign, due to unfavourable conditions for investments and endemic corruption. 

“Mthuli in all insanity increases toll fees and passport fees for alleged road infrastructure repairs without accounting for over ten years of toll fees collections which clearly didn’t go towards roads rehabilitation and maintenance.  What guarantees do we have this time around that he will properly allocate and use the funds?” he questioned. 

“One day Zanu PF will tax married couples for sexual intimacy. The proposed budget is a mess and unfriendly to the people who already suffer mismanagement and corruption. The State continues to loot. We however are hopeful parliament will reject the nonsensical proposal and send Mthuli back to consulting and come up with a sensible budget.”

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