THE Consumer Council of Zimbabwe (CCZ) has sounded the alarm over the adverse impact of a new tax regime implemented last month, which has led to significant price hikes across various sectors, further burdening ordinary citizens already grappling with the country's prolonged economic instability.
Finance minister Mthuli Ncube, during the presentation of the 2024 National Budget in November, introduced several taxes, including a wealth tax and a sugar levy.
However, the subsequent increase in passport prices, toll fees, motor vehicle registration fees, and fuel importation levies, coupled with recent additions like a 15% tax on spectacle frames and lenses, has worsened the financial strain on consumers.
In an interview with businessdigest, CCZ's corporate affairs director, Phillmon Chereni, highlighted the impact on low-income urban earners.
Notable spikes were observed in prices of essential products like cabbage, salt, tomatoes, onions, and cooking oil.
“As measured by the council’s (CCZ), low-income urban earners’ monthly basket of six increased by 22,66% from ZW$2 958 460,7 (US$490 as at November 1) in November 2023 to ZW$3 628 944,20 (US$590 as at December 1) in December 2023,” Chereni said.
“Among the top shakers and movers in the basket were cabbage, salt, tomatoes, onions, and cooking oil, which rose by 97,7%, 63,7%, 56,4%, 50,6% and 44,8%, respectively.
“This is partly attributed to the high demand for these products during the festive season. In contrast, water and rates, washing powder, transport, and education recorded the least movement.
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“Commodity prices increased sharply due to the steep depreciation of the local currency after the relaxation of the managed exchange rate by the central bank last month,” he added, noting that local authorities and some government agencies had also hiked prices.
The Zimbabwe dollar has depreciated by over 70% to ZW$10 927,52 on the official foreign exchange market against the US dollar since January, exacerbating the economic challenges faced by citizens.
The Famine Early Warning Systems Network (FEWS NET) reported a 45% increase in the cost of living in Zimbabwe dollars in the last month alone.
Compared to January 2023, the cost of living has surged by about 595%, primarily driven by the devaluation of the local currency.
FEWS NET noted that the new taxes were driving up US dollar prices in Zimbabwe, affecting household purchasing power, particularly for those earning in Zimbabwe dollars.
“The devaluation of the Zimbabwe dollar and rapid increase in the cost of living is expected to particularly impact households earning in Zimbabwe dollars, with the rise in USD prices also negatively impacting household purchasing power as the lean season peak,” FEWS NET said.
The sugar levy, criticised by the Confederation of Zimbabwe Industries (CZI) in a December submission to the government, was deemed excessively high and a potential obstacle to affordability for consumers.
CZI warned that the proposed US$0,02 per gram tax on sugar in beverages, excluding water, could render beverages unaffordable.
The sector, consuming about 7 000 metric tonnes of sugar per month, would face a staggering tax burden, with implications on the cost of living for citizens.
The proposed levy could lead to a monthly tax payment of approximately US$140 million for the beverage sector, totalling US$1,6 billion annually.
“This proposed levy is extremely high, and will see beverages being not affordable to consumers,” CZI said in its paper.
“The beverages sector in Zimbabwe uses about 7 000 metric tonnes of sugar per month. The minister proposed to introduce a levy of US$0,02 per gramme of sugar contained in beverages, excluding water.
“This proposed levy is extremely high, and will see beverages not being affordable to consumers. To put things into context, the beverages sector in Zimbabwe uses about 7 000 metric tonnes of sugar per month.
“When charging the US$0,02 per gramme tax, it implies that a kg of sugar pays a tax of US$2, and a metric tonne of sugar will pay a tax of US$20 000, at a time when a metric tonne of sugar only cost US$900. This means that for the 7 000 metric tonnes of sugar consumed per month by the beverage sector, they have to pay a monthly tax of approximately US$140 million amounting to US$1,6 billion per annum,” the report notes.
As Zimbabweans grapple with rising prices and economic challenges, the impact of the new tax measures reverberates through households, prompting concerns about the affordability of essential goods and services for ordinary citizens.
See full interview on Page 6.
