Online Reporter
Business Reporter
TOBACCO merchants have appealed to the Government to scrap the 15,5 percent Value Added Tax (VAT) charged on inter-merchant leaf transactions, warning that bureaucratic delays in processing tax refunds by the Zimbabwe Revenue Authority (ZIMRA) are severely choking working capital.
Under the current tax framework, when a merchant receives an international order and buys the matching grade from another local supplier, ZIMRA treats the exchange as a standard domestic business-to-business transaction.
This attracts the standard VAT rate of 15,5 percent.
Because tobacco is strictly an export commodity, the final outbound shipment is zero-rated.
AS a result, purchasing merchants must front the 15.5 percent tax to their peers and then lodge input tax credits with ZIMRA to reclaim the funds.
Industry executives argue that while the tax is theoretically refundable, ZIMRA takes several months to liquidate the credits.
The administrative lag effectively traps millions of dollars on the revenue authority’s balance sheet during the peak of the marketing season.
“We are buying a product purely to aggregate specific grades for international buyers. Charging VAT in the middle of an export chain locks up working capital that should be deployed immediately to pay farmers, clear contract inputs, and fund green-leaf processing,” said tobacco value chain expert Tapiwa Masedza.
