ZIMBABWE – Zimbabwe has announced a reduction in the sugar tax on beverages, following negotiations with the Confederation of Zimbabwe Industries (CZI).  

The initial tax rate of US$0.002 per gram of sugar has been revised to US$0.001, providing relief to both the beverage industry and consumers.  

The decision comes after concerns were raised that the original tax rate would surpass the cost of the contents in high-sugar beverages. 

The Treasury clarified that the special surtax on sugar content will only be imposed on added sugar.  

This adjustment aims to balance the government’s revenue needs while addressing the industry’s and consumers’ concerns about the potential economic impact of the higher tax rate. 

Schweppes Zimbabwe, a prominent player in the country’s beverage industry, had responded to the initial tax rate by implementing two price adjustments for its popular Mazoe cordial.  

The company increased prices by 17 percent for a 2L*6 pack initially and later raised it further to US$24 for the same pack. Schweppes explained that the sugar tax had a more pronounced effect on Mazoe compared to ready-to-drink products, as it was calculated per gram instead of the global norm of per milliliter. 

While the reduction in the sugar tax rate is welcomed, industry experts and accountants caution that there are still associated costs for businesses adapting to the revised tax structure.  

Companies will need to invest time and resources in updating their systems, processes, and pricing strategies to align with the new regulations. 

Schweppes highlighted the impact on working capital stating, “Unlike VAT, the sugar tax is a cost to the business, whose funding carries the cost of money. In the beverage industry, supply to formal retailers and wholesalers comes with longer payment terms. The effect is strain working capital, as the tax has to be paid before customers have paid.” 

The reduced tax rate is expected to ease some financial burden, but companies will need to navigate the adjustments required for compliance. 

Economists and accountants emphasized that businesses must be prepared to invest in recalibrating accounting software, training staff on new procedures, and making necessary adjustments to stay in compliance with the revised sugar tax regulations. 

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