Fuel prices set to increase

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  • As Ncube proposes increase on fuel excise duty

Tinashe Makichi

Finance and Economic Development Minister Mthuli Ncube said government will increase excise duty by 7 cents per litre on diesel and paraffin and 6,5 cents on petrol with effect from December 01, 2018, a move which is going to see price of fuel rising in the coming week.

Presenting the 2019 National Budget, Ncube said the country’s fuel has become relatively cheaper compared to prices obtaining in the region, creating an arbitrage opportunity for local consumers and transiting traffic to export.

“Current market developments have also distorted the fuel market. The country’s fuel has become relatively cheaper compared to prices obtaining in the region, creating an arbitrage opportunity for local consumers and transiting traffic to export.

“This arbitrage opportunity has partly contributed to the increase in consumption of fuel products, with volumes for the period January to October 2018, amounting to $1,29 billion,” said Ncube.

“The laid out fuel pattern is clearly unsustainable, considering that the available foreign currency reserves have to be shared among other critical priorities. I, therefore, propose to increase excise duty by 7 cents per litre on diesel and paraffin and 6,5 cents on petrol to reduce the arbitrage opportunities. This measure takes effect from December 01, 2018,” he said.

Going forward, Ncube said taxation remains one of the key sources of domestic resource mobilisation, particularly under the current circumstances where access to cheaper offshore financing is limited.

Efforts to mobilise domestic resources have, however, been hampered by the ballooning tax debt.  The stock of tax debts amounted to $4,5 billion as at  October 31, 2018 compared to $1,19 billion in 2015, representing a phenomenal growth of 278 percent

While some taxpayers have been constrained by economic challenges, Ncube said others have deliberately chosen to evade or defer payment of taxes. In some cases, taxpayers have voluntarily wound up companies and registered new establishments, in order to avoid settling the outstanding tax obligations.

What is also apparent is that, company directors are deliberately violating their fiduciary responsibility, hence are contributing to the accumulation of unpaid tax obligations. Ncube said such actions constitute negligence, fraud and abuse of authority.

“It is, thus, necessary to institute measures to promote tax compliance as well as curtail errant behavior by directors and company public officers. I, therefore, propose that directors or shareholders of a company that wound up voluntarily in order to avoid payment of the taxes be jointly and severally liable for the tax liability. This measure takes effect from January 01, 2019,” said Ncube.

On tax reliefs, Ncube pointed out that, government has reduced the 15 percent tax previously slapped on platinum miners for exporting unbeneficiated product. Ncube said the figure has since been reduced to staggered rates with effect from January 01, 2019.

“Honourable Members would be aware that government introduced a 15 percent tax on the exportation of un-beneficiated platinum, with a view to compel 199 mining companies to expeditiously transition towards beneficiation of the mineral.

“Cognisant of the investment that had already been made by some mining houses towards attaining milestones in the agreed road map, the export tax was reduced from 15 percent to staggered rates with effect from January 01, 2019,” he said