Massive food price hike looms
GOVERNMENT has introduced Value Added Tax (VAT) on nearly 40 imported basic food commodities that constitute the bulk of the consumer bread basket, products that until now have been excluded from the 15 percent tax.
The tax, which is likely to increase the cost of food, at a time the country is facing serious food shortages, was effective from February 1.
According to a notice in the Government Gazette of January 22, Finance Minister, Patrick Chinamasa, amended Section 78 of the VAT Act by repealing clauses that until now allowed the imported food commodities to be taxed at zero rate.
The move also applies to goods used or are consumed for agricultural purposes.
“It is hereby notified that the Minister of Finance and Economic development, in terms of Section 78 of the Value Added Tax, makes the following regulations: … 4) the Second Schedule of the Value Added Tax (General) Regulations, 2003, published in Statutory Instrument 273 of 2003, is amended by the repeal in Part 1 and Part 2 of the following: Zero Rate: Supply of goods used or consumed for agricultural purposes… (Other goods) Section A: zero rated foodstuff,” read Statutory Instrument (SI) 9 of 2016.
The SI listed products falling in more than three dozen tax categories that with effect from this month lose their zero-rated status in terms of VAT, which products include maize meal, flower, rice, cooking oil, potatoes, margarine, eggs and several varieties of fruits and vegetables.
The move is meant to protect the local industry from an influx of cheap imports that have of late flooded the market as the country struggles to produce enough to feed itself.
For years now, local consumers have been benefiting from the exclusion of VAT on these imported foodstuffs, which products have been generally cheaper than those produced locally.
The 15 percent tax on foodstuffs is likely to increase the cost of food.
The development comes at a time when the country is girding itself to deal with a food crisis resulting from an El Nino-induced drought that that is affecting southern Africa.
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