Forex duty on 'luxuries' goods, not on cars

Published: 26 November 2018
The Government has published a list of predominantly luxury goods that, with effect from Friday, attract duty in foreign currency on importation. A variety of foods and drinks such as cheese, wines, fruits and fruit juices, meat, chocolates and selected vegetables, as well as perfumes, cigarettes, ordinary and racing cars feature on the lengthy list.

This followed the announcement by Finance and Economic Development Minister, Professor Mthuli Ncube, while presenting the 2019 national budget on Thursday last week that some items would soon attract import duty in foreign currency.

He moved with speed to invoke the Customs and Exercise Act and impose duty in foreign currency on the goods a day later. Except for one or two, a majority of items on the list are, in our view, veritable luxuries that any person can do without, but for which some of us were willing to pay scarce foreign currency importing them.

Instead of paying high duty for the items — as every luxury good must attract — the importers simply transferred money from their banks or paid in bond. This was really cheap for those who must be happy to pay the top dollar for their expensive tastes.

The announcement was made in a Statutory Instrument of a Government Gazette published last Friday in terms of Section 115 (3) of the Customs and Exercise Act (Chapter23:02) and would be known as (Designation of Foreign Currency Dutiable Goods) Notice 2018.

Clause 3 (1) of the regulations read as follows: "Subject to section 3, the Minister of Finance and Economic Development hereby designates goods whose tariff codes and description are listed in the Schedule below for the purpose of Section 115 (3) of the Act.

"(2) Every person who imports any goods designated in terms of this notice shall pay duty in foreign currency. (3) Goods purchased on or before 22 November 2018 and consigned on or before 3rd January 2019, shall be exempted from the operation of this notice provided an approval for the exemption is obtained from the Ministry of Finance and Economic Development within 40 days of date of importation of the goods."

A country such as ours, one that is facing extreme foreign currency shortage like we have been doing over the past few years, cannot afford to allow its people to spend scarce foreign currency importing perfumes, sweets, biscuits or wines. It will be to show a lack of seriousness if that was allowed to continue. Our hospitals are struggling to procure enough medicines; we are struggling to secure enough foreign currency to import petrol; we are facing challenges in importing electricity yet we have some people spending that money on wants.

It gets more depressing when one learns that all this was happening when our economy actually produces most of the goods that were being imported so cheaply.

The imposition of duty in foreign currency should discourage our people from spending much money on the unnecessary imports and encourage them to buy local alternatives. Our farmers are growing enough groundnuts, tomatoes, cucumbers, fruits and so on to meet local demand.

If they aren't they must take this opportunity to grow more of the crops so that they earn more money meeting domestic demand. The Government move will create more jobs locally instead of exporting them, save foreign currency and grow our economy.

Thus we see a welcome multiplier effect from this policy. However, it is our considered view that some of the goods should not have been on that list.

Racing cars should definitely be there, the same for gaming articles but ordinary vehicles could have been excluded. We don't take a Toyota Vitz, Mazda Familia or Nissan Tiida as a luxury good. Indeed most of us spend much money importing used cars from Japan, Singapore and Britain.

Between 2009 and last year, we shelled out an estimated US$3 billion on motor vehicle imports — predominantly from Japan. Figures released by the Zimbabwe Revenue Authority (Zimra) early last year show that Zimbabweans imported 323 000 vehicles in the period under review, with 198 800 coming directly from the Asian economy. Zimra collected tens of millions in import duty.

Because of low disposable incomes, the fact that local car assemblers haven't been able to make affordable vehicles of the right size and that the local financial sector doesn't offer finance to enable people to buy the locally manufactured cars, most Zimbabweans' ambition of driving their own vehicle is met by Japan.

They are not shunning new, local brands, but they simply cannot afford them. We appreciate Prof Ncube's argument, but we suggest that on vehicles which, in our considered view, aren't a want, but a need that the local market cannot meet, he can be more flexible. A certain percentage of import duty on smaller and less expensive cars could be paid in foreign currency while the other portion is paid through transfer or local currency. In doing so, our people would be able to save enough to be able to buy their own modest ex-Japanese car.
- chronicle
Tags: Forex,


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