adminparticular cigarette manufacturers so as to synchronise tax laws with issues related to value addition.
Mr Takawira was speaking on the sidelines of a breakfast seminar held in Harare yesterday to discuss fiscal and related matters affecting the tobacco industry.
“Currently, we are exporting raw tobacco and the question is why not promote value addition by proposing lower rates on duty for cigarette manufacturers because they are the ones who can add the value to the tobacco.
“About 98 percent of the tobacco we export is raw and this is unsustainable, value addition is therefore critical so as to run away from exporting our raw tobacco,” he said.
Quantum Excise rate of US$15 per 1 000 sticks is said to be high according to TIDSI and viability becomes almost impossible and value addition to raw tobacco becomes unattain- able with such a punitive tax regime. However, a Zimra official said it was reasonable compared to the regional rates.
“Zimbabwe is actually cheaper in terms of these rates compared to countries like South Africa and Mozambique were they charge exorbitant amounts that result in the rampant smuggling of cigarettes into those countries,” he said.
Speaking on behalf of his organisation, Mr Takawira also said that the Finance Ministry had moved VAT deadlines from the 10th to the 25th of every month while excise duty remained due on the 20th of each month.
He argued that it would become a mammoth task to pay two taxes within a period of five days which would be more like “double taxation”.
“We feel excise duty should be moved to the 25th since it is based on warehouse draw-downs as opposed to Value Added Tax that is based on actual sales, on the other hand almost all cigarette manufacturers sell their products on credit so the due date then falls before debtors settle their accounts,” added Mr Takawira.
Tax expert and Tax Management Services managing director Mr Tendai Mavhima blamed lack of sufficient knowledge regarding tax issues on the part of the tobacco chain starting from the tobacco farmers themselves for the tax woes bedevilling the industry.
“Before VAT was introduced in 2004, Zimra undertook an opinion survey within tobacco farmers regarding which tax system they would prefer for their produce when selling at the auction floors between exemption and zero rated taxing system.
“Unfortunately, due to a lack of in-depth knowledge they opted for tax exemption and little did they know that they would not be able to claim their input taxes as opposed to zero rating which allows a farmer to make a tax claim from input tax costs incurred,” he said.
Mr Mavhima therefore expressed his willingness for advocacy on tax reforms so that players in the tobacco industry can be well versed with tax issues and their implications so that they can make informed contributions when taking part in tax issue deliberations, a sentiment echoed by Mr Takawira.
Online Reporter