Opposition legislator Fadzayi Mahere says the 2024 National Budget will harm small businesses after the Finance Minister proposed to reduce the Value Added Tax threshold to US$25 000 from US$40 000.
In his budget presentation on Thursday, 30 November, Ncube said only traders registered for VAT and with valid Tax Clearance Certificates can buy goods from manufacturers.
The VAT registration threshold will be cut from US$40 000 to US$25 000, or the local currency equivalent, starting in January 2024.
Posting on X, Mahere said this will result in a hike in the prices of goods and negatively affect overall demand. She said:
The attack on small businesses in the new Budget is staggering.
The Value Added Tax threshold has now been reduced to US$25 000 from US$40 000.
In simple terms, this means that any small business that makes an average of $2100 per month or more will now have to register for VAT.
The impact on small businesses is that they will now have to increase the cost of their goods by 15% to enable them to collect the VAT.
The impact on a consumer is that the cost of goods will go up by at least 15% to accommodate this tax.
The impact overall is that demand will go down because the prices are too high.
Spending will go down and the economy will become even more comatose than it is now.
The VAT tax rate is at 15% despite calls from businesses for it to come down to 14.5%.
In a country where unemployment exceeds 85%, it is grossly irrational to propose a budget that taxes those trying to run a small business for survival.
The entire budget is anti-people. It’s a mess.
However, responding to Mahere, one Mbonisi Siziba said nothing will change as producers already sell their goods with 15% VAT. He said:
Manufacturers already sell their goods with 15% VAT, therefore tax is trickled down to the final consumer, nothing changes except that tuckshops will be charging the same prices as supermarkets.
VAT registration will also enable the SME to purchase directly from the manufacturer legally.
Tafadzwa Marere concurred, saying small businesses don’t have to increase prices by 15%. He said:
Not quite. They deduct the input tax on VAT on goods they buy so they don’t have to increase by 15%. If they use the same markup they should be fine.
What happens is that they start to have to remit that value added to Zimra. It’s only fair, isn’t it? Maybe the cost of compliance.
Economa added:
It doesn’t work like that Fadzi, the small businesses will be able 2 claim input tax on the purchases. If goods cost $10, the input tax is 1.30 which they claim from ZIMRA hence no need to increase by 15% coz the net cost is now $8.70. When they sell for $12 the tax is $1.57, therefore 0.27c tax.
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