‘How Duty is supposed to work’

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DUTY is a fee charged on goods imported into a country. 

It is a form of government tax. 

This fee is meant to discourage imports as they would be competing with local goods on the local market.

However, Duty is very often misconstrued to be a source of revenue from individuals or companies that outsource goods for luxury or commercial purposes.

If maize and maize meal are both grown and processed locally, the Duty set for imported maize and maize meal ought to be high because there is no logical reason to procure that product from beyond the nation’s borders.

It can go as high as 100-200 percent otherwise the import might outcompete the local products, to the detriment of the economy.

But if the product in question is neither grown nor processed locally, the Duty set therein must be low – particularly goods that are meant for agricultural, mining or industrial purposes. 

It will be in the best interests of the nation if such products are readily available for the sake of production.

Setting high Duty for such products is shooting oneself in the foot.

High Duty on products meant for running industry discourages the importation of machines that would have otherwise increased production, employment and development in the nation.

Treating this type of Duty as revenue and income is a sign of intellectual shortsightedness which is more taxing on the nation in the long run.

Here is a product one needs but his country does not produce. Upon purchasing it across borders, one is charged 100 percent Duty at the border. 

His product becomes twice as expensive before accounting for other costs like transport, storage and insurance.

Seeing that the product is of much use to the nation, the demand remains but it is the retail price which increases to about three-fold the cost of purchase.

It is then the final consumer who suffers. It should not be the case for industrial products that are not produced locally.

Luxury products, like televisions and radios, among others, must have a moderate Duty unless the products are produced locally.

But instead, we find goods like electric pressure cookers, which are not locally available, being charged 100 percent Duty.

It is for this reason many people can no longer afford the basics.

They are largely imports with high Duty set for them by companies like the Zimbabwe Revenue Authority (ZIMRA).

Imports have to be discouraged if they threaten local goods and one way that was innovated to do just that was charging Duty.

But in countries like Zimbabwe, where the local industry is down and very little is being produced, recklessly setting high Duty on goods on demand will worsen the burden on the civilians.

Unless the Government encourages local firms to produce and is genuinely willing to empower them, high Duty on imports will simply raise the prices on the market.

Governments can also subsidise the cost of the local goods so as to further encourage retailers to purchase them and consequently discourage the purchasing of Duty-carrying imports.

What has revenue from Duty charges on imports benefitted Zimbabwe?

What industrial infrastructure or apparatus has it built?

All we witness are individuals from these Duty-charging companies buying homes and cars; testament to the large amounts of money they are making from capitalising on the importation of goods.

Little blame must be put on the entrepreneurial people who source imports upon accepting the painful reality that their nation is now scarcely a producer of anything. We already have Western-imposed economic sanctions and extended power cuts. 

These are a hindrance to industrial capacitation and we can hardly control them. 

But, as for Duty, it is up to us to identify which products benefit us if they have a high, moderate or low Duty.

This raises the issue of priority. 

If the Government’s aim is to boost industry, then industrial goods should have low Duty.

This was done by former President Robert Mugabe who complemented the Land Reform Programme with a zero percent charge on agricultural machine imports.

High Duty should then be placed upon the imports that the local industry chooses to produce.

If the priority is to make locally unavailable goods available and affordable to the local market, the Duty should not be too high as the final consumer price will increase exponentially.

The issue of national priority determines which import products are to be highly taxed and otherwise.

The US has increased Duty on Chinese products despite their high demand on the US market.

Many people, however, criticise the Donald Trump administration for almost solely targeting Chinese products for high import taxation. 

Trump is justified in raising tax on imports that are outcompeting local goods.

His priority is clearly to empower local goods. To the contrary, in China, not too many goods from the West are imported. 

Duty on imports from the West is also not as high. 

This is because the Chinese prioritise acquiring the know-how, particularly in science and technology.

Setting up factories in China is also quite easy. 

But this is because the Chinese typically borrow technological secrets from Western companies that use their cheap labour force and plenteous land for industry.

Zimbabwe has yet to set its priorities straight as many of the measures that have been taken, often under immense pressure to solve Western-induced economic problems, have been counter-productive.

For example, though load shedding is unavoidable, why should the nation receive the little electrical power it has left in the middle of the night as opposed to work-time when industry can function and produce.

Between 10pm and 4am the most an employed individual can do with his/her electricity is leave electrical devices charging over night.

The same goes with Duty on imports. 

Seeing that local production is low, this form of tax must be used as a stabilising force with the purpose of encouraging local production.

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