The Zimbabwe Revenue Authority (ZIMRA) and retailers have locked horns over the former’s intention to collect value added tax (VAT) on rice for periods dating back to 2017, a move the retailers have described as illegal.
Ministry of finance Secretary George Guvamatanga has instructed the taxman to proceed with the collections after observing that the reclassification of rice in packages of 25kg or less which is being used by retailers as defence had a public policy interest.
The senior Treasury official contends the measure was aimed at supporting the local packaging industry through promoting repackaging of cheaper bulk rice into smaller units.
Guvamatanga also highlighted the legislation which gave effect to the measure was promulgated timeously adding taxpayers had the opportunity to seek clarity or raise concerns over any omissions with Treasury.
However, in a statement Monday, Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu dismissed the directive describing it as “illegal”.
He said the VAT exemption for rice set out in Statutory Instrument (SI) 9 of 2006, but was amended in 2017.
The CZR boss said the effect of the repeal was to restore the position set out in SI 9 of 2016 that all rice (including prepacked rice in packages or less than 25kg) was VAT exempt.
“The decision by ZIMRA lays bare the need for policy consistency. ZIMRA was quiet for three years, not indicating that VAT was to be collected on rice. It is only recently that it has sought to collect the VAT which was previously and still is exempt,” argued Mutashu.
“We wish to point out that it is an established principle of law that no tax can be imposed on a party, unless the same is clearly set out in legislation. At present, the law is that rice is exempt from VAT and even the ZIMRA system has not been and is presently not charging VAT.”
The CZR head added, effecting the decision was not only a violation of property rights, but a direct act on any confidence the business sector still had in the economy with a negative impact on the rule of law and policy consistency.