The Zimbabwe Revenue Authority (Zimra) collected US$884,5 million in the third quarter of this year against a target of US$972,3m, missing the target by US$87,8m representing a negative variance of 9%, as government finances continue to dwindle due to a severe liquidity crunch which has fuelled low capacity utilisation, company closures and job losses.
The decline in revenue comes at a time when the Retrenchment Board has approved the retrenchment of 5 600 workers this year so far while many companies are awaiting approval from the board to lay off hundreds of workers, which could also have a negative impact on revenue collections.
According to a report by Zimra Commissioner-General Gershem Pasi, the bulk of government revenue was realised from value-added tax (Vat), which contributed US$250,2m or 28% of total collections. Individual tax and excise duty contributed US$226,2m (26%) and US$122,9m (14%) respectively.
Vat on local sales performed badly as Zimra collected US$123,9m against a target of US$189,3m, resulting in a variance of US$65,3m or -35% of set target
“Net Vat on local sales contributed 49,5% to total Vat revenue and 14% to total revenue. There has been an 8% decline in net collections from the same period last year where a total of US185,3m was collected,” said Pasi in his report, before adding, “the performance of the revenue head can be attributed to the fall in industrial capacity utilisation which has resulted in reduced production of goods and services that attract Vat.”
Pasi also attributed the decline in Vat on local sales figures to “a decline in disposable incomes as some companies are retrenching, closing down or failing to pay their employees.”
He added: “The performance of the revenue head is expected to remain depressed until industrial capacity utilisation improves.”
Vat on imports for the quarter stood at US$126,3m against the expected collection of US$132,1m. The performance of Vat on imports was attributed to the tight liquidity position which is forcing importers to reduce their levels of imports.
Mining royalties had the second least revenue collection for the quarter after contributing US$33,1m to total revenue against expected collection of US$48,3m, resulting in a negative variance of 31%. Zimra attributed the fall in mining royalties to a decline in gold output and prices of gold on the international market. Corporate income tax stood at US$92,2m against a target of US$104 m registering a negative variance of 11%.
“Revenue collections from companies decreased by 10% from the 2013 third quarter collections of US$102,4m. This can be attributed to liquidity challenges that negatively affected the ability of companies to finance and recapitalise their operations,” said Pasi.
“The depressed performance of corporate income tax is also due to the harsh economic environment which negatively affected the profitability of local companies. The performance of the revenue head is not expected to improve in the fourth quarter as liquidity challenges continue to negatively affect the companies.”
Customs duty recorded a fall of 25% with US$88,2m collected against the projected amount of US$117,1m. Only individual tax surpassed the target which saw the authority collecting US$226,2m against a target of US$190m.