Zimra limits consumer spend in wholesalers to US$1000 in new measures

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Ryan Chigoche

HARARE (FinX) – The Zimbabwe Revenue Authority has limited spending by  consumers in wholesalers to US$1000 per 30 days as part of its measures to protect value chain integrity and unfair competition by informal traders.

This is in accordance with the Finance Act of 2023, which went into effect on January 1, 2024, and will see Zimra expand its attempts to force informal players to conform.

Local wholesalers have recently been channeling their products to the informal sector in quest of the greenback, causing shortages in legal retail channels.

Zimbabwe has a large informal sector, estimated to contribute over 60% of GDP. Due to the shortages of foreign currency and a skewed exchange rate policy in the  economy, local wholesalers have been finding it more profitable and easier to deal with informal retailers where there are also lower operating costs, less stringent regulations, and faster transactions.
However, this trend has seen formal retailers suffer as there has been a shortage of supplies from wholesalers which has led to job losses and reduced tax revenue for the government, which has now intervened.
In a circular, Zimra, who are tasked with enforcing the Finance Act of 2023 announced stringent measures to informal traders.
With purchases from the same wholesaler now capped US$1000 in one month, first time buyers from the wholesalers cannot purchases items which exceed US$20
”Purchases from the same wholesaler should not exceed USD1,000.00 in a period of not less than 30days; and Produces a receipt of goods purchased from the same wholesaler that is dated no earlier than 30 days from the date of the last purchase.
” Any person who purchases for the first time from that wholesaler in any calendar year, or if the person concerned cannot produce a receipt in proof of a previous purchase from the same wholesaler, such  person can only purchase goods not exceeding USD20.00 (or its equivalent in ZWL at the auction rate of exchange prevailing on the date of the purchase),” the circular read.
As per the Finance Act Regulation, blue chip  beverages maker Delta in a  circular said they will require a Valid  ITF 263 Tax Compliance Certificate, VAT for entities above the Zimra  threshold ,a  Taxpayer identification number on  top of the requisite liquor license.
Delta said  they will be collecting a surcharge of 30% above the standard price for remittances to Zimra for any trader that cannot provide those documents for  any sales exceeding US$1000 per transaction undertaken within a thirty day period.
As part of measures to protect value chain integrity in his 2024 budget, the Minister of Finance and Investment  Promotion Mthuli Ncube proposed  raft measures which limited  informals traders from accessing the products they sell from the  manufacturers, if they don’t have VAT registration.

The Finance Minister proposed in his 2024 budget statement that, with effect from January 1, 2024, only licensed and tax-compliant operators would be able to procure goods from manufacturers and wholesalers.

Farai  Mutambanengwe, an economist, told FinX the measures are a wild goose chase as Zimra will struggle to enforce some of  measures.

He said that the authorities should rather focus on making the formal retailers competitive first by addressing the issue of the 10% margin on the exchange rate.
 ”In terms of solving the problem of manufacturers selling to the  informal sector  I think its as simple as just fixing the issue of  the exchange rate that 10%  margin that retailers are allowed to charge if you remove that  then the retailers  will  become competitive they will be more than prepared to collect VAT,”

A recent survey by the Confederation of Zimbabwe Industries (CZI) found that 70% of manufacturers are now selling to the informal sector, up from 50% in 2020.

The survey found that manufacturers are attracted to the informal sector because it is less regulated and offers higher margins than the formal sector. Informal traders are also more likely to pay cash, which is important for manufacturers who are struggling to access credit from banks.

Adding to that  formal retailers may have accumulated debt with wholesalers, making them less creditworthy as  result wholesalers are hesitant to extend further credit or may demand upfront payments.
The formal retailers feeling the  pinch have  for long complained about the unfair competition from the informal sector who can offer lower prices due to lower overheads and tax evasion.
According to  Zimra the measures in the Finance Act are expected to encourage the informal traders to register with the tax authority.
Manufacturers are also now allowed to sell to wholesalers only; those that have a wholesalers licence, are registered for VAT and have a valid tax clearance.
Wholesalers can only sell to retailers as well as individuals and informal traders under the capped amount.
For ease of administration, the wholesaler shall retail all copies of receipts produced in proof of previous purchases for a period of at least three years.

According to the statement, informal traders are individuals who carry on a trade for their own account but are not a registered operator including a hawker or street vendor.

The category, according to Zimra, also includes a person who sells articles at a place commonly known as a people’s market or flea market. It also includes tuckshop operators selling goods on premises including residential but not licensable by the local authority for the sale of goods on a regular basis.

Zimra also included intermediaries who buy goods from manufacturers or wholesalers for resale to informal traders in the same category.

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