New tax depresses Truworths

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TRUWORTHS Zimbabwe says its financial performance for the half year ended January 6, 2019 was dampened by the introduction of a two percent tax on electronic transactions.
Its trading expenses increased significantly during the period under review due to the new levy.
Finance minister Mthuli Ncube in October last year announced an intermediated money transfer tax, which was aimed at expanding the tax collection base and ensure that the tax collection points are aligned with electronic mobile payment transactions.
However, Truworths said its trading expenses consequently increased by 14 percent during the period under review.
“The introduction of the two percent tax has significantly increased our bank charges. In a non-inflationary environment and a constant money basis, the negative impact of the two percent tax on our bottom line is in excess of $300 000 per annum,” Themba Ndebele, Truworths’ chief executive, told analysts at a briefing in Harare last week.
“With the two percent tax, it is like your cost-of-goods have increased by two percent. It is a significant knock on the business,” he said.
Ndebele noted that the implications of the levy also had a significant impact on the company’s pricing.
He said even though occupancy costs were not increased for the period under review, adjustments were expected to take effect from January 2019 onwards.
“Landlords think they can just multiply rentals by 2,5 and it will be okay. But consumers’ incomes have not been increased by 150 percent so it is very difficult for us to see eye to eye then and it looks like it is going to be tough to adjust to the devaluation,” Ndebele said.
The listed clothes retailer’s boss indicated that there has been a 82,95 percent increase in landing costs for imported goods since duty calculation was changed from a rate of 1:1 to 1:2,5.
“Inflationary pressures will persist in the next few months on imported finished product lines with the official devaluation of the RTGS$ exchange rate and rerating of the value for duty purposes from 1:1 to 1:2,5.
“Another wave of price increases is inevitable which will further dampen demand as personal income growths lag behind price increases,” Ndebele said.
Truworths posted a profit after tax of $1,5 million, up from $548 095 which was achived in the previous comparable period.
Group merchandise sales for the 26 weeks to January 6, 2019 were 16,6 percent higher than those of the prior comparable period.