The Zimbabwe Revenue Authority recorded a 9% drop in revenue collections in the six months to June as the country’s tax base continues to shrink due to weak economic fundamentals. In the period tax debt rose 33.5% to $2.63 billion.
The latest performance update from Zimra shows that gross collections for H1 amounted to $1.65 billion, which is 6.03% below the target of $1.75 billion, and also 9.31% below the same period last year. However, Zimra chairman Willia Bonyongwe said that there had been a general improvement in collections in the second quarter as the tax authority focused on improving operational efficiency and effectiveness, eradicating corruption and increasing the level of compliance among the taxpayers.
“The efforts are beginning to bear fruit as demonstrated by the gradual improvement in the revenue performance over the first half which was more evident towards the end of the second quarter”
The total refunds paid stood at $98.73 million, comprising Value Added Tax (VAT) (99.21%), Customs Duty (0.47%) and Non-Tax Revenue (0.32%). Therefore, net revenue collections in the first half of 2016 amounted to US$1.55 billion, compared to US$1.66 billion over the same period in 2015.
The bulk of the revenue for H1 was realised from Individual Tax (22.95%) followed closely by Excise Duty (20.24%). VAT on Local Sales contributed 18.37% while VAT on Imports contributed 10.97%.
REVENUE HEAD ACTUAL $ MOF TARGET $ VARIANCE $ VARIANCE %
Individual Tax 355,774,081.53 392,000,000.00 -36,225,918.47 -9.24%
Company Tax 144,874,280.66 167,000,000.00 -22,125,719.34 -13.25%
DFIR * 26,864,679.22 32,640,000.00 -5,775,320.78 -17.69%
Carbon Tax 15,950,212.73 17,850,000.00 -1,899,787.27 -10.64%
VAT on Local Sales 284,724,010.55 303,300,000.00 -18,575,989.45 -6.12%
VAT on imports 170,013,080.27 169,700,000.00 313,080.27 0.18%
Customs Duty 135,414,454.70 179,700,000.00 -44,285,545.30 -24.64%
Excise Duty 313,717,643.47 364,396,000.00 -50,678,356.53 -13.91%
on contracts 40,651,072.58 45,355,687.34 -4,704,614.76 -10.37%
Other Indirect Taxes 30,440,425.84 30,873,312.66 -432,886.82 -1.40%
Mining Royalties 33,002,985.15 51,900,000.00 -18,897,014.85 -36.41%
Non-Tax Revenue (1,194,496.93) -1,194,496.
Total 1,550,232,429.77 1,754,715,000.00 -204,482,570.23 -11.65%
Revenue collections from Other Taxes amounted to $30.44 million, which is 98.60% of the targeted $30.87 million. Both CGT and CGWT had the highest contribution of 36.97%, while Tobacco Levy was 34.57%. Other Indirect Taxes contributed 28.46% to total revenue under this revenue head. CGT debt as at the end of the H1:2016 amounted to $170.55 million up from the $168.81 million recorded at the beginning of the year. Tax expenditures from CGT for H1:2016 amounted to $5.39 million.
Performance was negatively affected by the lack of mortgage financing in the economy which resulted in CGT and Capital Gains Withholding Tax failing to meet their set target. However, there has been a bit of movement in this industry but it may not be sustainable enough to improve performance.
The tax debt rose by 33.50% to $2.63 billion by the end of H1. Of this, $1.45 billion was the principal, while interest amounted to $641.51 million and penalties amounted to $542.63 million.
Bonyongwe said in terms of the origin mix, 14.50% emanated from parastatals, 8.58% from councils and municipalities, and the remaining 76.92% was from private entities. “Over 70% of the debtors are still operational and ZIMRA is engaging them to ensure that current obligations are met, and at the same time arranging for the repayment of the old debt. Those with debts are advised to approach ZIMRA offices for the way forward.”
Bonyongwe also said the answer to resuscitating the economy lies in agriculture.
“Any increase in agricultural production has a positive impact on industrial capacity and commercial activity. Zimbabwe’s economy is agricultural-based and its people’s core competences lie in that industry. Farming is our way of life. Therefore, Zimbabwe’s economic recovery will always lie in this sector.”