By A Correspondent| The Parliamentary Committee on Budget has criticized Finance Minister Mthuli Ncube for implementing a new tax on fuel in transit, arguing that the policy’s disadvantages outweigh its intended benefits.

During his Mid-Term Budget Review, Ncube introduced a tax on fuel imported under the Removal in Transit (RIT) system, claiming that the funds would be reimbursed at the Port of Exit. This measure was introduced to combat transit fraud, where goods declared as transit consignments are offloaded in Zimbabwe instead of being transported to their final destinations.

However, in an analysis of the 2024 Mid-Term Budget Review, the Committee expressed concerns over the policy, describing it as overly burdensome with limited benefits.

“The committee is of the view that the payment of duty and reimbursement at the exit point will not adequately address transit fraud since transporters can offload fuel and reload with a different liquid. If ZIMRA is constrained to detect such malpractices, payment of duty and reimbursement will not address the existing challenge,” the Committee stated. They further noted that the issue would persist and that the policy undermines the ease of doing business for legitimate transit consignments, which will need additional operational funds to meet the duty obligations.

The Committee also highlighted the administrative challenges faced by ZIMRA in managing revenue that is not available for public spending, deeming the process unnecessary.

“Moreover, ZIMRA’s financial transactions are not always free of charge. This policy contradicts the Presidential mantra that ‘Zimbabwe is Open for Business’ and will negatively impact business operations through Zimbabwe. This could lead to retaliatory measures from other countries,” the Committee added. They warned that economic agents might opt for alternative routes through other countries to avoid excessive costs and burdens.

Additionally, the Committee argued that the policy violates regional trade agreements, specifically Articles 3 and 4 of the SADC Protocol on Trade, which mandate the elimination of tariff and non-tariff barriers and the removal of import duties.

“It is the Committee’s view that ZIMRA should strengthen its administrative efforts to curb transit fraud rather than plug its administrative gaps with a flawed policy. Alternatively, requiring a commitment from clearing agents to pay duty if goods do not reach the exit point could help mitigate transit fraud,” the Committee concluded.