Zimbabwe’s fiscal space further shrunk in the first half of the year amid indications government revenue collections tumbled 12% in the period under review, showing the economy is crumbling.
By Fidelity Mhlanga
Figures released by the Zimbabwe Revenue Authority (Zimra) for the first six months of this year show that the tax collector has missed revenue collection target by 12%, crippling government financially.
Government is struggling to meet its obligations, including paying civil servants on time.
Gross revenue collections for the second quarter grew to US$866,96 million from the US$781,99 million collected in the first quarter.
“The gross collections were 3% below the target of US$892,88 million. This compares favourably with the first quarter revenue performance where gross collections were 9% below target,” Happias Kuzvinzwa, Zimra Acting Commissioner General said this week.
In the first quarter to march, Zimra collected US$782 million against a target of US$861,83 million, missing the target by 9%.
In the second quarter to June, Zimra collected US$866,96 million, a 3% variance from a target of US$892,88 million.
This shows that Zimra has so far collected only US$1,65 billion for the past six months.
However, government still faces hurdles meeting its bloated public sector salary obligations timeously.
Treasury spends more than 80% of revenue on civil servants salaries, leaving very little to spend for capital projects.
Given that revenue collections are a key barometer upon which to measure the performance of the country’s economy, the situation on the ground paints a gloomy picture of the country’s future.
Under pressure from the International Monetary Fund, the government carried out a civil service audit between February and April last year aimed at flushing out ghost workers, redundancies and eradicating duplication of roles by 40%, but no cuts have been effected yet.
Tax collection has been dipping due as the economy teeters on the brink of collapse, a development that has seen Zimra battling to restrain the tax debt which rose by 30,9% from US$1,97 billion at the end of 2015 to US$2,58 billion by the end of the first quarter.
The breakdown of this debt is 0,18% government, 26,77% municipalities, parastatals and state owned entities, and 73,05% private entities. The debt is composed of 53,12% principal, 20,23% penalty and 26,65% interest.
Company closures have been quickening due to low local aggregate demand, competition from imports, high cost of doing business, capital constrains and antiquated machinery with nearly 150 companies folding in the second quarter of 2016.
Zimra said real-time connection of fiscal gadgets making it increasingly difficult for taxpayers to defraud government through value-added tax (VAT) fraud. There has, as a result, been an improvement in compliance levels, declaration of correct returns and payment of revenue.
Economist John Robertson said government is in trouble in a shrinking economy with the ban on imports and perpetual company closures reducing revenue collections.
“The situation is likely to get worse and is deteriorating fast. After the banning of imports they will fail to collect more revenue from imports. This will also reduce VAT if stock of goods decrease and there wont be more profit taxes. Many companies are retrenching people. Government is also a casualty of the shrinking economy,” he said.