Zimbabweans to pay duty in forex for vehicle imports

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By Staff Reporter

THE Zimbabwe government has since last Thursday been forcing all motor vehicle importers to pay excise duty in foreign currency.

The policy shift took the public by surprise as there was no warning.

Finance Minister Simbarashe Mumbengegwi only came out on Monday this week -- exactly four days later -- to confirm the new policy which takes effect immediately and covers all luxury goods.

“Payments of customs duty and value-added tax on the importation of any item of goods designated as luxury items shall be payable in US dollars, euros, or any other currency denominated under the exchange control,” Mumbengegwi said.

The general rate of duty for cars ranges between 60% and 80%.

Previously, importers paid duty in local currency, making it relatively cheap to import.

An official at the Reserve Bank of Zimbabwe told New Zimbabwe.com that the move to levy duty in forex was a "hostile reaction" to the central bank's refusal to devalue the local currency.

Said the official: "Apparently the government has decided to levy duty in forex out of frustration that the refusal by governor of the central bank to devalue the dollar is costing the treasury billions of dollars in uncollected potential revenue with the Zimbabwe dollar pegged at $250 to the United States dollar."

But the official warned that levying forex for duty tax on so-called luxury goods such as cars and clothing items will only worsen the situation as Zimbabweans will continue to find the forex through free funds purchased in the thriving parallel market which has become the de facto official market that determines prices and income demands.

"In the end, the government will only succeed to shoot itself in the foot. The government is admitting via the backdoor that President Mugabe’s rhetoric about defending Zimbabwe ’s sovereignty at all cost is hot air because the national currency is a pillar of sovereignty as the only legal tender in Zimbabwe," the RBZ official said.

Enterprising Zimbabweans have been taking advantage of the overvalued Zimbabwean dollar to import cars, clothing and other luxury goods for resale in Zimbabwe while paying pittance for duty.

Apart from denying treasury the much needed revenue from lost duty fees given the value of the Zimbabwe dollar in the parallel market, wholesale importation of goods without paying much duty has also negatively affected the local auto industry, especially regarding spare parts, as well as the textile industry resulting in regular company closures and massive job losses.

According to central bank figures, Zimbabweans have been spending an estimated US$400 000 a day importing an average of 80 used vehicles from Britain, Dubai, Japan, Singapore and the US.

The authorities pegged the local dollar at 250 to the US dollar in August, but on the unregulated market a US dollar costs about Z$14000.

The used-car industry has become a boom business sector in Zimbabwe.

In addition to duty calculated against the cost of the car, freight charges and insurance, importers have to pay surtax and value-added tax.

“Many people, especially those who had already paid for vehicles, will be hard hit by this policy shift,” an importer said.

Zimbabwe is in the seventh year of a recession characterised by four-figure inflation.

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