Zimra calls for tax system remodelling

via Zimra calls for tax system remodelling | The Herald June 26, 2015

THE Zimbabwe Revenue Authority wants Government to remodel the taxation system particularly for the clothing sector to focus on collecting VAT on the products rather than duty at point of entry.

Zimra commissioner general Mr Gershem Pasi told a Parliamentary Portfolio Committee on SMEs and Co-operative Development yesterday that Zimbabwe cannot compete with countries such as Vietnam, Colombia and China in making cheaper clothing.

He said, for instance, a shirt from China is landing in Zimbabwe at about $7, a price too low for local producers to match and remain in business.

“We are saying if we could re-look at how we are taxing; allow formal businesses to import new clothes because we can never compete with Vietnam, Colombia

and China in making a shirt. Even if we were to open David Whitehead today, we cannot compete at that level,” he said.

“So why not allow organised businesspeople to bring in their clothes, reduce the rates drastically and allow them to have new clothes.

“You can even buy second-hand clothes and allow new clothes to come in.

“Because if China can land a new formal shirt at $7 we can never make it at below that given our cost structures,” said Mr Pasi.

He said Zimbabwe is charging very high duty on new clothing and this has pushed people into smuggling second- hand clothes.

“Let’s review our taxation especially on clothing. We have such high taxation rates on clothing and it’s pushing people to find it lucrative to smuggle second-hand clothes. This has a very negative impact on our population; we may turn a blind eye on it but we wake up with diseases we are not sure where we got them from because we are getting what has been thrown away and we see it as new and we are desperate,” said Mr Pasi.

Zimra and other security arms are battling to contain smuggling and Mr Pasi said other initiatives are needed to bring the cancer under control.

“The borderline between Zimbabwe and Mozambique is no longer secure. I witnessed during our patrols that because there is no natural barrier between the two countries, some of the people are living on the frontier. We have witnessed situations where in the afternoon goods are stocked on the Mozambican side but when you come the following morning those goods are gone,” he said.

“But if our policy is to say those industries where we cannot compete, we allow new stuff to come in and then we make our money because when those goods come in they go into the shops. People can now go into the shops and we make our money on the VAT on the goods and on the PAYE because those companies can now employ people; pay them salaries and we get our PAYE,” the chief tax collector said.

In America and Europe, he said, very few clothing items are made in Europe but are imported mostly from Pakistan, China, Vietnam and Colombia.

“It’s the same goods which we say here the rates are so prohibitive and are encouraging people now to resort to smuggling.

“We have made new clothes so much unaffordable to the population that people have no choice but to buy the second-hand clothes.

“The sad thing is that they can buy the same new clothes at the same amount as they buy second-hand clothes.

“So we really need to re-look at our industrial policy and link it with it with our fiscal policy,” he said.

The clothing sector is facing stiff competition from the cheap second-hand imports.