Industry demands tax cut

LIVINGSTONE MARUFU

Captains of industry want government to immediately slash the fuel taxes amid rising cost of production triggered by sharp increases of the precious liquid on the back of the Russia-Ukraine war.

This month, the government raised the price of fuel twice inside a week in response to global developments following the conflict between Russia and Ukraine. This has resulted in prices of basic good commodities skyrocketing.

The Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza told Business Times that  industry was  feeling the strain and cutting taxes would help the economy to navigate the stormy waters.

He said the government was taking longer to effect the tax cuts on fuel to make it affordable and the economy continues to burn on the back of fuel price increases.

“The cutting of taxes should be done forthwith to help  the ailing economy to reboot before the situation deteriorates further,” Matsheza told Business Times.The  pump price of diesel rocketed  to US$1.68  a litre from US$1.51 a litre.

Petrol is now selling at US$1.67 a litre from US$1.51 a litre,  making all transport  of goods and people  expensive.

Government said it will look at  whole duty framework in its bid to cushion the economy from the external shocks.

The spike in fuel prices has triggered a corresponding hike in the prices of other goods as the cost of production  and transportation of goods surge.

Economist Gift Mugano  also said government should  immediately cut taxes to reduce the damage.

“What government should immediately do is to cut taxes to cushion the economy from  the external shocks as 50% of  the  country’s fuel prices come from taxes,” Mugano said.

Industrialist Sifelani Jabangwe said the government should cut taxes “sooner rather than later” as the economy has already been affected by the current price hikes.

University of Zimbabwe lecturer and economist Moses Chundu said it would be advisable for the government to seek to absorb the effects of the rise in global oil prices through appropriate adjustments in taxes given that taxes are a significant portion of the fuel prices. Zimbabweans now fear that  the new hikes will have a huge impact on the  imported food, as prices are  pegged based on the  new fuel prices.

Prices of basic goods have more than quadrupled since last year, with a foreign-exchange shortage leading to scarcities of everything from fuel to food.

But President Emmerson Mnangagwa called  for calmness  on the part of the industry.

Writing in The Sunday Mail, Mnangagwa said Cabinet was seized with the matter on cushioning the economy to limit shocks of fuel price hikes.

“We are looking at the whole duty framework to cushion our economy from shocks and pressures from galloping fuel prices. There is no need for panic,” Mnangagwa said, adding that he had directed the Ministry of Energy and Energy Development to review and reduce duty and surcharges on fuel, so the pump prices of petrol and diesel remain manageable.

“We need stability in the fuel market so we minimise imported inflation for price stability in the economy,” Mnangagwa said.

The captains of industry  also said government should improve the manufacturing sector’s foreign currency retention levels to allow the industry to fund its operations rather than to depend on auction allotments which takes time to settle.

“The authorities should increase the auction system allotments in order to help the industry to get  the much needed working capital to sustain operations,”  Matsheza said.

He said  there was a need for industry to access cheap lines of credit.

“There is a huge need  for companies to access credit lines  from local and international banks but before that there is also a need to make borrowing attractive in the local banking sector as interest rates are too high even in US$ terms,” Matsheza said.

The lending rates in US$ are between 12% and 18% which is too high for local  companies, according to experts.