The Zimbabwe Coalition on Debt and Development has said the scrapping of the travellers rebate on public transport will effectively kill small businesses while it will fuel corruption at the border posts.
With effect from January 1, 2016, Government revised the travellers rebate to $200,00 from $300,00 and removed rebate on travellers in public transport through Statutory Instrument Number 148 of 2015 (Customs and Excise (General Amendment) regulations (No 80).
However, ZIMCODD has raised concern on the implications of the policy on informal sector, which is one of the key clusters to economic growth.
“The scrapping of rebate on travellers on public and commercial transport poses a number of challenges to the informal sector in general and traders in particular. Since the economy is now informalised the sector plays a critical role in providing a source of livelihood for the unemployed. “Despite the growth of the informal sector and its critical role in the national economy, there has been little policy, technical and financial support from Government, said ZIMCODD.“As enshrined in the new regulation, Statutory Instrument Number 148 of 2015 (Customs and Excise (General Amendment) regulations (No 80) issued by Finance and Economic Development Ministry, traveller’s rebate of $200 will only be granted to pedestrians and travellers using private vehicles.”
“This means all travellers importing goods in a transport service vehicle drawing a trailer and is used for conveyance of goods through a port of entry have no rebate and shall pay full duty. Most of the cross borders traders and travellers use public transport and very few use private cars,” said ZIMCODD.
According to National Statistics Agency in 2014 the informal sector contributed about 20 percent to gross domestic product.
“Since most informal traders are small scale cross border traders, this policy change will stifle informal sector growth by making imports expensive.
“Small cross border transporters whose business has been directly supported by small scale cross border traders will suffer as travellers will opt to walk across borders to enjoy the $200,00 rebate available for pedestrians,” said ZIMCODD.
“Despite paying full duty at the port of entry, informal traders will also have to pay taxes to their respective local authorities. This will add too many taxes on one sector.
The scrapping of the travellers rebate is among a cocktail of measures that Government is implementing to improve revenue collection from imports and compelling informal cross border traders to contribute to the national fiscus.
It is divided into two categories namely total rebate and partial rebate.
Total Rebate is an allowance granted on all used personal effects and one of the conditions is that imported goods are for personal consumption and not commercial purposes.
Partial Rebate is an allowance granted on goods imported by a traveller once a month on the date of first entry into Zimbabwe in that calendar month on certain conditions.
ZIMCODD said while policy intervention is meant to curtail abuse of the travellers’ rebate, it has potential to promote smuggling of goods and corruption as travellers will find ways to avoid paying heavy import duty, leading to potential loss of revenue on the part of Government.
“It is better to collect little, consistently than to create loop holes for revenue leakages,” said ZIMCODD.
ZIMCODD said Government should make efforts to understand the profile and perceptions of small traders in order to address challenges that have been faced in taxing the informal sector.
The Non-Governmental Organisation added that Government should extend technical, financial and policy support to the sector as merely taxing them without the necessary support will result in the suffocation and subsequent extermination of the sector.
“Government should consider introduction of a trader’s rebate that allows a certain value of imports to qualify for rebate. There is need to harness resources from all sectors including mining and plug all tax loop holes as well as desisting from over relying on individuals for tax payments.
“There should be a proper tax mix (that enables progressive contribution of individuals and cooperates) which promotes tax justice,” said the organisation.
ZIMCODD said there is need to strike a balance on the timing for implementing local industry revival strategies and reduction of imports on goods that can be locally produced so that these policies can complement each other.