Zimbabwe has plugged loopholes in the utilization of the clothing manufacturers’ rebate (CMR) after some players were found to have abused the facility over the past six years, resulting in the state losing millions of dollars in tax revenue. Malpractices include the disposal of fabrics intended for value addition in the domestic market and transfer pricing. Finance and economic development minister Mthuli Ncube said although the facility had assisted manufacturers to reduce production costs, thereby making local apparel competitive in the export market, some beneficiaries were undermining tax revenue and distorting both national and regional value chains and linkages through malpractices, according to newspaper reports in the country. Some clothing manufacturers were using transfer pricing, under-invoicing and incorrect declarations to evade local taxes while taking advantage of preferential trade agreements to realize huge profits in regional markets. The rebate facility, which is due to expire this year after benefiting more than 50 companies, has been renewed over the years after taking into account developments in the textiles and clothing industry. Materials eligible for the rebate are from man-made yarn and include denim, cotton sewing thread, woven fabrics of polyester staple fibers, chenille fabrics, tulles and other net fabrics. Some players have been reportedly importing material that is locally available and later producing garments for the international market, a development that is threatening to destroy downstream players such as cotton farmers, ginners, spinners and weavers. Zimbabwe Textile Manufacturers’ Association (ZTMA) president Admire Masenda, however, said the association is not aware of any company abusing CMR, but authorities should come down hard on anyone breaching regulations.
