Revenues collected by the Zimbabwe Revenue Authority (ZIMRA) for the third quarter (Q3) was $920 million (rounded up) and although this number misses the target by 0.22%, it is 6% better off compared to Q2 collection of $867 million. This comes on the back of recent IMF report that the Zimbabwean economy will shrink by 0.3% this year and a further 2.7% next year. The biggest contributor of revenue was personal tax contributing 24% whilst excise duty and local VAT contributed 18% each to total 60%. This is in large contrast to South African Revenues Services (SARS) results which according to their 2015/16 report 36% of their revenues are personal taxes, 18% income tax and 26% VAT. The reason why excise duty is quite high in Zimbabwe is simply because we are an import economy with imports topping 45% of the country’s GDP compared to 29% for South Africa. In contrast, South Africa, where there is a vibrant manufacturing and service sector; income tax from companies contributes 18% whilst in Zimbabwe where its only 12% of revenues collected.
High ZIMRA debts
Another shocking statistic is that ZIMRA’s debt to revenue ratio is an astonishing 65% as compared to 9% for SARS. It is highly unlikely that all of ZIMRA’s $2.65 billion debt is recoverable given than more than 19 companies have de-registered from ZSE since 2009 and according to Zimbabwe Congress of Trade Unions (ZCTU), 150 companies have closed in 2016 so far, leaving more than 9,000 workers out of jobs. ZIMRA should disclose the percentage of this debt that is recoverable and eliminate debts of companies which have closed, are in liquidation &/or judicial management and give a debtors aging analysis for a clearer picture of the make-up of the debt.
Plastic Money effect
Plastic money which has a paper trail through the banking records, has led to higher VAT being collected, as it makes it harder for tax payers to fudge their records. $157 million was collected under this tax head, 3.5% better than the budgeted figure. This is despite a good number of small retailers still relying on cash only sales especially the Chinese nationals who have been fingered as some of the culprits siphoning the scarce USD cash out of the Zimbabwean economy. Recently on social media, a picture emerged showing a poster on the shop front of a Choppies supermarket informing customers that they were only taking ‘cash only transactions.’ This was viewed by many Zimbabweans as an attempt to mop up the remaining liquidity and lock it up for future purposes when the infamous #bondnotes is finally introduced.
Mrs Willia Bonyongwe, The ZIMRA Chairperson in her Q3 ZIMRA report applauded the effect that the controversial Statutory Instrument 64 of 2016: Control of Goods (SI64) has had on the companies operating in sectors that were protected by the bill. She highlighted new recruits and company taxes being realised from that initiative, although the slowness in processing telegraphic payments by Reserve Bank of Zimbabwe might affect the production lead times if raw materials are not timely obtained. This has often affected companies like Surface Wilmar which relies on importing soya beans and to manufacture cooking oil which has resulted in the locally produced cooking oil temporarily disappearing from the local shelves whilst procurement issues are being sorted out.
Hope for ZIMRA
Hope for collecting more taxes in future is pinned on tackling the issue of corruption within the corridors of ZIMRA, tightening borders to reduce smuggling and the introduction of a Cargo Tracking system by end of October 2016 to curb transit fraud. The tracking system coupled with other measures such as escorts is expected to see an increase in excise and import duty tax heads. The issue of tackling corruption however, is a long term project which unless it is tackled from the top-down; it will be difficult to win the on corruption.