HomeOpinionPresumptive tax is dead!

Presumptive tax is dead!

THIS week the Zimbabwe Revenue Authority (Zimra) published its revenue performance report for the first half of the year which showed that the taxman collected US$1,72 billion against a target of US$1,74 billion.

Key contributions to the tax income came from value added tax (26%), individual tax (25%) and excise duty (14%).

Completing the tally of tax heads published by Zimra are other traditional taxes like mining royalties, customs duty and company tax which are showing signs of stress.

The 1% variance appears like a great effort in a floundering economy, but in reality Zimra can do better than this only if the tax collection model resonates with the state of this economy.

We have often been told by government that unemployment is just 11% and not over 80% cited by multilateral organisations like the IMF.

The rosy picture painted by government on unemployment in this country is premised on the fact that the informal sector has become the main employer, contributing almost 60% to the GDP. The shift of the economy from traditional business models to the informal sector was expected to also see the informal sector contributing meaningfully to tax revenue. And the answer was the introduction of presumptive tax to bring in revenue from small-scale traders including cross-border traders, furniture-making traders, transport operators, small-scale miners, restaurant operators, flea market and hair salon operators, among others.

These operators are required to pay presumptive tax every quarter on the tenth day of January, April, July and October.

Easier said than done. A glaring aberration in the Zimra report is the minuscule contribution of presumptive tax to the overall tally. There is no figure specifically attached to presumptive tax in the report.

It is lumped under other indirect taxes which contributed US$58 million or about 5% of the US$1,2 billion raised. The actual figure remains unknown because 89% of the indirect taxes came from withholding tax on tenders.

The presumptive tax contribution is somewhere in the 11% (US$6,4 million) range, a figure which also includes road access fees and stamp duties. We can safely surmise that the figure is too insignificant to bother the compilers of the tax report.

Appearing before a parliamentary committee last month, Zimra Commissioner-General Gershem Pasi spoke of plans to introduce fiscalised machines on public transport vehicles like kombis and taxis to ensure operators do not evade taxes.

This was in response to observations that the presumptive tax on public transport operators was ineffective. Presumptive tax has not been effective in the informal sector and players demonstrated concerted unwillingness to pay tax and they will find ways not to pay.

In the report, Pasi said an “improvement in the outlook as envisaged under ZimAsset would boost revenue performance”. This is true, but it is also worth noting that Zimra has failed to come up with models specifically designed to collect money from the informal sector.

Worse still, policies on the ground are not right because the informal sector pays “taxes” to political party warlords who control the informal economy. Presumptive tax is dead!

Recent Posts

Stories you will enjoy

Recommended reading