The Parliamentary Committee on Budget has criticized Finance Minister Mthuli Ncube for introducing a tax on fuel in transit, arguing that the policy’s disadvantages outweigh its intended benefits.
In his 2024 Mid-Term Budget Review, Ncube announced the imposition of tax payments on fuel imported under Removal in Transit (RIT), stating that the funds would be reimbursed at the Port of Exit. This measure aimed to combat transit fraud, where goods declared as transit consignments are offloaded within Zimbabwe instead of exiting the country.
However, the Budget Committee has expressed strong reservations about the policy, labeling it as “laborious” and of limited benefit. In its analysis of the Mid-Term Budget Review, the committee highlighted that the tax would not effectively address transit fraud, as it would still be possible for transporters to offload fuel and reload with another liquid, making detection difficult for the Zimbabwe Revenue Authority (ZIMRA).
“The payment of duty and reimbursement at the exit point will not adequately address transit fraud. If ZIMRA is unable to detect such malpractice, this measure will not resolve the issue,” the committee stated. “Moreover, this policy places an unnecessary financial burden on genuine transit consignments, as companies will need additional operational funds to meet duty obligations.”
The committee also criticized the administrative burden the policy would place on ZIMRA, arguing that the process of receiving and reimbursing revenue that is not available for public spending is inefficient. Additionally, the committee noted that ZIMRA’s financial transactions are not always free of charge, further complicating the policy’s execution.
“This policy runs counter to the government’s ‘Zimbabwe is Open for Business’ mantra, as it creates excessive costs and operational challenges for businesses using Zimbabwe as a transit route. As a result, economic agents may opt for alternative routes through other countries, negatively impacting Zimbabwe’s competitiveness,” the committee warned.
The committee further argued that the tax policy violates regional trade agreements, particularly Articles 3 and 4 of the Southern African Development Community (SADC) Protocol on Trade, which call for the elimination of tariff and non-tariff barriers, as well as import duties, to facilitate smoother trade in the region.
Instead of implementing the new tax, the committee recommended that ZIMRA strengthen its administrative capabilities to tackle transit fraud more effectively. The committee also suggested that clearing agents be held financially responsible for duty payments if goods fail to reach their exit point, offering an alternative solution to the current policy.
The criticism underscores growing concerns among legislators and industry stakeholders about the impact of the policy on Zimbabwe’s business environment and regional trade relations.