The Zimbabwean government is forced to take a step back. Two years after the introduction of the tax on leather exports (75 cents per each kilo), the African country has started granting tax relief to sevens exporting companies which together represent – according to 2012 estimates – 30% of Zimbabwe’s foreign sales (1500 tonnes for 10 million dollars ). The decision was announced in an official bulletin last 21st of October. Without this exemption, companies would be doomed to failure. Zimbabwe had adopted a protectionist duty in 2014. (Recently, also countries as Russia and Azerbaijan have imposed the same measures for untreated leather). In government intentions, imposing a duty on exports was meant to implicitly restrict the sale of raw materials to foreign markets for the benefit of national manufacturing. However, as underlined by Zimbabwe’s case, things are not so simple. Two years after the adoption of the tax, only the Cold Storage Company (the state-run meat industry company) said that the tax had benefitted them. Private companies, such as the Livestock and Meat Advisory Council, complained instead that since 2014 the tax was a burden too big for them because neither local tanneries nor slaughterhouses have had the financial strength to absorb the entire national production of leather or to pay leather tanning companies to tan their raw leather. As a result, these measures have just a crisis for everyone.
The costs of protectionism: Zimbabwe gives tax reliefs to companies that struggle because of taxes on leather exports
