ANALYST: Chitsika

Consumers relieved as retailers cry foul

 A recent proposal by the Finance and Development Planning Minister Kenneth Matambo to change certain laws governing the Value Added Tax (VAT) has left many consumers locked on the horns of a dilemma.

The amendments are expected to be effected at the beginning of the 2014/15 financial year expected to commence on April 1.

Presenting the 2014/15 budget early this month, Matambo revealed that plans are underway to revise VAT and Income Tax Act. Matambo some commodities – deemed to be basic to the lives of the citizens – will be exempted from VAT.

The government had placed most of the basic commodities under the zero-rated when it comes to VAT. Foodstuffs such as sorghum, maize meal for human consumption, millet grain, millet meal, wheat grain, maize cobs, flour and sugar are currently zero-rated.

According to Matambo, some of the commodities which were zero-rated will be exempted from VAT in the next financial year. Matambo said the proposal is aimed at improving the fiscal landscape in the country.

However, while others were celebrating that the government has decided to exempt foodstuffs and farming equipments from VAT, consumers remain perplexed.

A random survey conducted by Voice Money on the streets of Francistown has established that the general public is generally excited about the move. “I think it means lower prizes for us in shops,” said Miriam Kanyevu, a street vendor along the ever busy Blue Jacket Street. Kanyevu added that the business operators in Francistown have been making consumers to pay through their nose.

Another resident of Francistown, Boitumelo Hadzani said when VAT was introduced at the turn of the millennium, the cost of living escalated. “It will be a relief to us. Consumers have been finding is difficult to match the rising prizes because of the VAT,” said Hadzani.

However, financial commentators said indications are that the development will hurt the businesses and makes life difficult for consumers.

Farai Chitsike, a financial analyst with Mazars Botswana said the development might have inflicting implications on consumers. “Exempting products from zero-rated simply means that retailers would not be entitled to claim the expenditure from the government,” said Chitsike.

In most business cases, Chitsike said retailers will now claim the expenditure from the consumers.

“Retailers will simply increase prices in order to cover for their expenditure such as transport and storage costs,” he said.

VAT was introduced in 2000 at the rate of 10percent following the abolition of Sales Tax before it was increased to 12percen in 2010 in a bid to augment government’s revenue base.

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