A Zimbabwean, Esther Vongai Zimudzi, has sued Finance Minister Mthuli Ncube, the Zimbabwe Revenue Authority (ZIMRA) and the country’s Attorney General for charging Value Added Tax (VAT) on rice, which is exempt from tax payment.
In a statement posted on the website of the Journalism Students’ Network of Zimbabwe, Zimudzi, who is represented by Obey Shava, argues that rice is exempt from taxation in terms of Statutory Instrument 9/2016 as read with Statutory Instrument 26A/2017.
She argues that the tax payment has resulted in price increases of rice of up to 25%, a situation that has forced retailers and wholesalers to pass on the cost to consumers.
Zimudzi claims that such price increases are negatively affecting retailers, wholesalers and consumers, who can no longer afford to buy the commodity.
She further claims that this violates the right to freedom of trade as enshrined under Section 64 of the Constitution as retailers have been selling the commodity on the basis that it is exempt from VAT payment, only for them to be retrospectively penalized.
Zimudzi is seeking a court order to declare as unconstitutional the respondents’ demand for VAT payment on rice supposed to be paid retrospectively by retailers and wholesalers, who imported the commodity more than three years ago.
Ncube, ZIMRA and the Attorney General have not yet responded to the lawsuit.
According to the state-controlled Herald newspaper, rice was exempted from paying VAT in 2017 by the then Finance Minister Patrick Chinamasa, but suppliers and packers of 25 kilograms of the commodity or less received requests for VAT payment, dating back to 2017.
In a letter dated September 22, 2020, written by Finance Permanent Secretary George Guvamatanga and addressed to Delloitte and Touche, Treasury refused to stop attempts by the state to retrospectively collect VAT from retailers and wholesalers from 2017, arguing that there were some new policy changes.
Guvamatanga is quoted by the newspaper as saying, “… The reclassification of rice and packages of 25kg or less had a public policy objective. More specifically the measure was aimed at supporting the local packaging industry through promoting repackaging of cheaper bulk rice into smaller units. Furthermore, legislation to give effect to the measure was promulgated timely and tax payers had an opportunity to seek clarity or raise concerns over any omissions with Treasury.
“In view of the above, your request for a retrospective exemption of rice in packages of 25kg or less is therefore rejected. Your clients should thus approach Zimra for a payment plan.”