Stakeholders in the beef industry have described Government's decision to scrap the 15 percent value added tax (VAT) on live animal sales as a positive step towards promoting organised marketing and boosting farmers' disposable incomes.
This comes as Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube recently announced the suspension of the tax, saying Government had observed that 85 percent of live animals were sourced from smallholder farmers most of whom are ineligible for VAT registration, which means that the tax had no economic benefit to the country.
Prof Ncube said this during the presentation of the 2024 mid-term budget and economic review. He further observed that there had also been a decline in demand for livestock products attributable to low disposable incomes traceable to the El-Nino induced drought.
"The emergence of middlemen who use toll slaughtering abattoirs has since substituted livestock auctioneers and formal abattoirs to minimise or in some cases, evade payment of VAT.
"Subsequently, carcass sales have shifted from formal inspected abattoirs that feed into the formal meat value chain to non-tax compliant depriving Government of revenue while increasing risks of diseases, as the meat would not have passed through mandatory inspections," he said.
This is supported by statistics from the Livestock and Meat Advisory Council (LMAC) showing that commercial abattoirs and beef wholesalers accounted for 62 percent of 2023 first quarter beef sales (before introduction of VAT), dropping to 39 percent in the comparable quarter this year after introduction of VAT.
"In order to encourage formal trade of meat products, I propose to exempt live cattle, pigs, goats, sheep and bovine semen from VAT.
"I also propose to exempt poultry meat and kapenta from VAT with effect from August 1, 2024," added Prof Ncube.
Meanwhile, LMAC executive administrator, Dr Reneth Mano said Government rightfully noted that drought-induced depression of incomes for consumers has reduced demand for meats, pushed cost of livestock production up and triggered drought-induced offloading of beef cattle onto the market culminating in a precipitous fall in producer prices threatening viability of the livestock industry.
"The VAT on live animals and meats introduced in 2024 budget had the unintended debilitating effects of further depressing livestock producer prices, especially of cattle, goats and porkers. Prices of cattle in rural areas fell from between US$350 and US$450 to less than the US$150.
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"The US$200 minimum threshold, the combined effects of drought and new taxes all weighed heavily on the rural cattle farmers," said Dr Mano.
The removal of VAT will bring the much-needed relief to livestock farmers who are set to realise more money per animal when they sell some of their non-productive cattle to buy food for their families and for drought survival feeding of productive animals.
Said Dr Mano: "The removal of VAT will also see more commercial abattoirs going back to the villages partnering with village business units (VBUs) to buy cattle in bulk directly from them, thereby shutting the door on the battalion of opportunistic informal traders who were paying very low farm gate prices for cattle in drought-hit rural districts. This will become a thing of the past very soon."
Zimbabwe Commercial Rabbit Breeders Association (ZICORBA) president, Mr Regis Nyamakanga concurred saying the removal of VAT would boost viability especially for small livestock producers.
"Firstly, it will reduce the financial burden on farmers by lowering the overall cost of production by affording them the chance to invest in essential livestock and related products such as feed, veterinary medicines, and breeding stock," the ZICORBA president said.
