Zimbabwe’s second hand car imports dropped by 10 percent to around 35 000 in 2017 due to biting cash shortages and increased customs duty. In 2016, Zimbabweans imported 42 000 second-hand cars.
But the increase in customs duty to 150 percent around August last year, from 96 percent, as Government intensified efforts to stem the country’s import bill.
In the first half of last year, $180 million worth of second-hand cars were imported into the country.
The figure was $70 million less than the $250 million spent in the same period in 2016.
According to documents from the country’s tax collector, the Zimbabwe Revenue Authority (Zimra), the importation of second-hand cars has been “precipitously going down due to a number of factors which include the increase in customs duty and foreign currency constraints”.
In line with the current foreign exchange management framework, $48 million was utilised for various foreign payments through RBZ and banks in the first half of 2017.
The money was received and administered by the Reserve Bank through the Foreign Exchange Management System.
It is understood that Zimra had the audacity to charge huge taxes since car importers were siphoning the much-needed foreign currency.
The hiking of customs duty on second-hand vehicles helped in widening Zimra’s tax net.
Used cars make a huge portion of the estimated 1,2 million vehicle population in the country, according to 2016 statistics from the Zimbabwe National Road Administration (Zinara).
Meanwhile, Zimra is focusing on small to medium enterprises (SMEs) to widen the tax base, as the informal sector is understood to be harbouring about $2 billion.
Experts have implored Government to imitate Rwanda which is working with Brazil and Columbia to come up with a total transition from informality to formality.
One of the findings in the 2015 International Labour Organisation report was that one way to formalise the informal sector was to address negative aspects through protection and incorporation into the mainstream economy, while preserving the informal sector’s job creation and income-generating potential.
Zimra — which is targeting about $4,3 billion this year — has been advised to implement key requirements in expanding the tax net so as to inculcate a culture of voluntary tax compliance.