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Tax collector, the Zimbabwe  Revenue Authority (Zimra) said on Sunday local businesses must be  ready to effect a 0,5 percentage point reduction in value added tax (VAT), which comes into effect on January 1.

The move, which will likely result in minor price reductions, follows the decision by Finance and Economic Development Minister, Professor  Mthuli Ncube, in the 2020 national budget presented last month, to  reduce VAT to 14,5 percent from 15 percent effective the beginning of  the year.

“Registered operators, businesses registered for VAT and those that  require to register, should ensure that they are ready to implement  the new rate of tax,” Zimra said.

“Accounting systems, transacting systems and devices for recording  taxable transactions (fiscal devices) should be adjusted accordingly  in time for implementation.”

According to Zimra, VAT is an indirect tax on consumption, charged on  the supply of taxable goods and services.

It is charged on transactions rather than directly on income or  profit, and is also levied on the importation of goods and services.

VAT was introduced in 2004 to replace sales tax.

While the tax reduction is meant to be beneficial to the generality of  the population, its effects are unlikely to be felt due to inflation,  which keeps pushing up the prices of goods and services. — New Ziana.