Biti told parliament last week that monthly revenue generated since June had remained stagnant, signalling a budget deficit for the current fiscal year.
This means government would fail to generate US$1 billion targeted in the revised national budget, piling more pressure on the fiscus following the dollarisation of the economy in February.
He said plans to increase revenue in a “shallow budget” of US$1,3 billion was a reflection of lack of meaningful foreign direct investment in the economy.
“Our income has averaged from US$4 million per month in January 2009 to $25 million in February, $40 million in March, to a high level of $98 million in June,” Biti said.
“But in June we reached a plateau. We have failed to break the $100 million mark. In June we were $98 million and in September we collected $90 million. So we have reached a plateau vis-a-vis our collection and in the budget that we are currently working on right now, we are actually working on modest figures of estimates of collections of $110 million per month, which we will give you a shallow budget of $1,3 billion, which is why Honourable Mangoma (Economic planning minister) is correct when he says we just have to have investment in this country otherwise we are sunk.”
Dogged by the current economic problems, the Finance minister said any plans to service the US$5,7 billion external debt using the current revenue inflows were far fetched. Government requires over US$60 million for wages and pensions each month apart from other expenditures.
“So if our unvalidated debt is $5,7 billion, it means assuming that we are living on water and air and God’s grace, we are required to pay that debt for six years and clearly that is not sustainable,” Biti said.
Plans by the treasury to effect the 30% increase in budget could be in line with far reaching tax proposals made by the Confederation of Zimbabwe Industries (CZI) for the November national budget for 2010. The industrial body is among other tax reforms pushing for an increase in value added tax from the current 15%, a move that is likely to see a surge in consumer prices.
“We recommend an increase in the rate of VAT to 17.5% and a sharp reduction in the number of exempt products to compensate for revenue loss under other tax heads. This will revert to 15% once revenue generation has improved,” reads the CZI input to the national budget.
“The due date for VAT payments should revert to the end of the month following the month which VAT is accrued to encourage credit creation in the economy.”
Apart from the tax reforms industry also recommended the creation of an “Independent Budget Office” to “oversee the budget from a non-partisan perspective”.
The Zimbabwe National Chamber of Commerce is against plans to increase VAT to improve revenue generation. Instead it recommends that government should lower taxes.
“In order to then increase the revenue base the following recommendations are being made. Review or reduce all taxes — VAT, Pay As You Earn, corporate tax etc to stimulate demand by attracting more players and compliance,” the ZNCC said.
Government, the ZNCC further recommended, should also consider flat rate on excise duty.