16 November 2012

Zimbabwe: Prices of Cigarettes, Beer Set to Go Up

Prices of clear beer and cigarettes are likely to go up after Finance Minister Tendai Biti yesterday increased excise duty on the two in the 2013 national budget.

Excise duty on clear beer was increased from 40 to 45 percent, while the duty on cigarettes went up from US$10 per 1 000 sticks to US$15 with effect from December 1.

Minister Biti said the move was meant to protect consumers from taking the "hazardous products" and reduce social costs associated with beer and cigarettes.

Analysts described the duty increase on beer as moderate, while saying the 50 percent increase in the duty on cigarettes was too steep.

On the duty on beer, Finance Minister Biti said that no review had been effected since January 2004.

"The rate has not been reviewed since January 2004, in order to allow ample time for business to re-invest in new plant and equipment," he said.

"As a result, significant investment in bottling and ancillary plants has been injected since the adoption of the multi-currency regime in February 2009. Volumes of beer sales have, thus, grown by about 270 percent from 2009 to 2012."

Minister Biti said that excise duty on imported beer was levied on the landed price at the border unlike the local product whose duty was based ex-factory.

As a result, retail prices of imported beer indicated that the landed price of imported beer was lower than local producer prices.

"I, therefore, propose to levy a specific rate of excise duty of $0,45 per litre or 45 percent, whichever is higher, in order to level the playing field between imported and locally produced clear beer," said Minister Biti.

On the increase of excise duty on cigarettes, Minister Biti said the move was in line with trends in the Sadc and Comesa regions that have also embraced the global campaign to protect consumers.

"Given that Government plays a pivotal role in the provision of health delivery services to mitigate the social costs arising from consumption of hazardous substances, there is, therefore, need to levy an excise duty that closely relates to the expenditure incurred in addressing the associated social costs," he said.

Minister Biti said that local excise duty rates were lower compared to those prevailing in the region, resulting in the smuggling of cigarettes to neighbouring countries where the market was more lucrative.

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