Government grants tax waiver to raw hide exporters
Minister of Finance and Economic Development, Patrick Chinamasa
GOVERNMENT has given an export tax relief to seven registered hide merchants in a move meant to save their businesses.
In a notice published in the Government Gazette of October 21, the Minister of Finance and Economic Development, Patrick Chinamasa , said the export tax relief would only apply to registered merchants.
He listed seven merchants with a total export quota of just over 1,5 million kilogrammes worth about US$10 million as the beneficiaries.
There has been friction between government and merchants since the 2014 introduction of a tax on raw hide exports. The measure was meant to promote local beneficiation.
“Subject to section 12C of the Value Added Tax, export relief shall be granted on unbeneficiated hides exported by a registered merchant issued with an export permit by the Minister of Agriculture as approved by the Minister responsible of Industry and Commerce,” Chinamasa said in the notice.
He listed the beneficiaries as Outback Safaris, E.R. York & Co, Bulawayo Abattoirs, Surrey Abattoirs, Binder Abattoirs, MC Meats Abattoirs and Koala Meats. The stockpiles covered by the waiver are those of hides that accumulated between January 1 and July 31, 2016.
Chinamasa said the relief should not exceed the maximum quantities prescribed for each individual exporter while the unbeneficiated hides should be exported through the port of entry nearest to the stockpile of the raw hides.
Bulawayo Abattoirs is sitting on the largest stockpile of hide (25 030 hides weighing 576 000 kg) followed by E.R. York & Co (13 000 hides weighing 299 000) and MC Meats which is sitting on 10 000 hides weighing 230 000 kg.
This is the second time the tax relief has been granted to hide merchants, the last time being in February last year when nine merchants were allowed to sell about two million kg of hides.
When the tax was introduced in 2014, the Livestock and Meat Advisory Council expressed grave concern, pointing out that the tax had an effect of negatively impacting on the viability of abattoirs.
“Of particular concern is the quantum of the tax at US 75 cents per kilogramme which effectively constitutes a ban on exports of raw hides and skins of all animals,” said the Council in its report.
“A key problem is that due to lack of finance, tanners are unable to buy raw hides from abattoirs while abattoirs are unable to pay tanners for them to custom tan on their behalf,” it said, adding that due to the tax, hides were stock-piling at abattoirs causing significant loss of income for operators.
But the State-owned meat processor, Cold Storage Company (CSC), welcomed the tax, saying hide deliveries to its tanneries had increased tenfold due to the measure.
CSC chief executive officer, Ngoni Chinogaramombe, told the Parliamentary Portfolio Committee on Lands, Agriculture, Mechanisation and Irrigation that the company had started to reap the benefits of the export levy.
“We’ve a tannery, which is now starting to operate meaningfully but it’s under judicial management.
“Our tannery was one of those that were affected (by export of raw hides) and it wasn’t operational for some time. But thanks to the new law, most traders are now compelled to tender their hides to either us, Bata or any other tannery in the country.
“We understand that there are some leakages and people are still smuggling raw hide out of the country, but it has helped our company to the extent that since January, we’ve seen an increase in hides being processed from just over 1 000 to 10 000 last month,” he said in June last year.
The hides are usually retained by abattoirs as they are considered part of the slaughter fee, which money they can only get once the hides have been sold.
The collapse of the country’s leather sector over the past decade and a half has seen it failing to absorb all raw hides and skins that are produced locally, leaving raw hide exports as the only viable option available to merchants.
In 2012, Zimbabwe exported 5,5 million kg of raw hides worth nearly US$30 million. The figures include the export of crocodile, zebra, hippo and buffalo hides.