Sales tax: The Mongu Rice Story
In a land far away there once was a restaurant called the Le Zambi. This restaurant has a lot of people in the neighbourhood who depend on it and as such the people appoint Bossano 1 and a team of “honourables” to help run the establishment. This restaurant is run by Bossano 1. Bossano 1 appoints a lady Eminem with a very nice accent to manage the financial affairs of the restaurant. This restaurant has over the years incurred a lot of debt which was used on rehabilitation and other “Infrastructure” related issues.
Every Friday a group of big buyers visit the restaurant and order a table of Mongu rice usually with chicken. The big buyers always split the bill according to who has eaten/drank the most fairly. After each meal a waiter sent by Lady Eminem always gives the big buyers a receipt showing how much is to be paid. The Receipt always includes a 16% tax on the meal called VAT.
The group of big buyers who we shall call “the Dons” supply the Mongu rice to the restaurant and then proceed to go buy a finished meal at the same restaurant. For every a sack of Mongu rice to reach town each of the big buyers contributes according to their business.
The Dons include many people chief among them a man called bashi mine the miner, bashi mabala the farmer, bashi tamanga the trader and ba shofelo the driver. So for example if Ba shofelo uses one of his trucks to move the rice from the village to town he proceeds to give Lady Eminem an invoice of his costs including a 16% tax called VAT. When he orders a meal at Le Zambi Lady Eminem will deduct the tax she was supposed to pay Ba shofelo (input VAT) from the tax ba shofelo is supposed to pay for the meal (output VAT). Note the 16% from the transport and the meal do not automatically cancel out. Lady Eminem does the same for bashi mabala the farmer who supplies the rice and bashi tamanga the trader who connects everyone together. Bashi Mine is special, he is not involved in supplying Mongu rice but has people on the ground who help remove stones from the Mongu rice. Bashi Mine has a deal with Bossano 1 where he sells some of these stones in the backyard of the restaurant. For every stone sold bashi mine is entitled to a refund from Bossano for the labour and equipment used since Bossano 1 has no equipment of his own. Stones have Zero Rate VAT. So when Lady Eminem gives the bill to bashi mine he charges her the VAT for his services of removing the stones but she cannot charge him VAT for the meal since stones are zero rated.
This becomes a problem for Lady Eminem, because after calculating how much everyone should pay and how much she should pay them, she occasionally pays a lot of money to bashi mine to refund him for removing stones. Now at another table in the restaurant sits a group of people called the “honourables” and these guys pretty much call the shots alongside Bossano 1. These guys make the rules in the restaurant.
For example the honourables made a rule that every bill should have 16% tax. This was the VAT bill of 1995. The honourables also included what is called a VAT schedule which is a list of people among the Dons who should be charged less VAT because of their standing in the community. For example Doctors, Church pastors who eat Mongu rice never pay VAT as well as Mealie meal millers and some transporters and other special people. Everyone else usually pays.
Lady Eminem proceeds to sit at the honourable table and convinces them to change the bill. She proposes scrapping VAT and replacing it with Sales tax bill format. With this Sales Tax bill Lady Eminem will not have to pay Bashi mine for removing stones as this bill is non-refundable. Lady Eminem proposes a Sales tax of 9% for locals and 16% for imports.
This means for every bag of Mongu rice supplied to the restaurant bashi mabala, bashi tamanga and ba shofelo will not get refunded the tax when they buy a meal of Mongu rice with chicken. The Dons begin to worry as this means they will have to pass on the cost to other people in community. This pass on of costs is cascading tax and leads to inflation, generally high prices of food in the restaurant etc.
Lady Eminem proposes the new Sales tax bill but leaves out the schedule of listed items that should include who should not be taxed eg. Church pastors, Doctors and special goods. So now everyone begins to worry in the restaurant.
Some guy with round gogos walks into the restaurant and orders macaroni la finkubalieri with a glass of munkoyo. This guy calculates that the high prices/inflation will not be caused by the sales tax but by the “worry” that people have on the sales tax. Behind the scenes, he moves from table to table to try and convince the team of Lady Eminem and honourables to include a schedule list of non-tax items. If this guy with round gogos fails then most likely prices will begin to increase come july 1st. But he is just a guy with round gogos, you can make your own conclusions.
Note: According to Official record mr round gogos does not exist. All characters fictitious
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