HomeBusiness DigestSI64 causes decline in net revenue collections: Zimra

SI64 causes decline in net revenue collections: Zimra

THE Zimbabwe Revenue Authority (Zimra) has blamed the introduction of Statutory Instrument 64 of 2016 (SI64) and rampant smuggling for the 6,9% slump in net revenue collections.

By Fidelity Mhlanga

Zimra’s third quarter revenue performance net collections were pegged at US$854,1 million, a 6,9% decline compared to the same period last year. The government had targeted to collect US$917,3 million.

This figure was also a 2,7% decrease from the 2015 third quarter revenue collections.

Reflecting the negative impact of SI 64 of 2016, customs duty collections contributed US$64,3 million in Q3 of 2016, a 28,2 % decline from US$89 million collected in the same period last year.

The tax authorities admitted that the decline was aggravated by the introduction of SI64 of 2016, which removed numerous products on open general import licence.

“The unsatisfactory performance was mainly due to revenue forgone through concessions, trade agreements and rebates amounting to US$150,7 million, and government policies, which were introduced to curb the influx of imports of designated manufactured products,” Zimra board chairperson Willia Bonyongwe said in a statement.

As the economy continues to face a myriad of problems, economist Eddie Cross said the overall 2016 revenue collections were likely to be the worst since 2013.

“The critical number was the ‘net collections’ which were 6% below budget. I doubt if total income for 2016 will reach US$3,4 billion which is US$200 million below 2015 and nearly one billion dollars below 2013.The fall in customs and excise duties points to the continued decline in domestic demand across a broad front,” he said.

Smuggling also impacted on the excise duty revenue collections, tumbling to US$157,9 million against a set target of US$192,3 million.

This decline in excise duty collections represented a 10,3% drop from the third quarter of 2015 (Q315), and the poor performance of the revenue head was owing to the decline in the volume of petroleum products due to smuggling.

“The decline could be a proxy for smuggled volumes of fuel. The future revenue performance is expected to improve especially when smuggling cases are curbed on goods in transit and fuel consignments through use of electronic cargo tracking system and escorts,” Bonyongwe said.

Petrol imports decreased from 122,4 million litres in the third quarter of 2015 to 106,6 million litres in Q316.

Diesel imports declined from 122,2 million litres in Q315 to 194 million in Q316.

Another economist Tapiwa Mashakada said although smuggling was playing a big role in revenue decline, the depletion of nostro accounts was taking a toll on the decline of fuel imports.

“Fuel imports dropped due to the unavailability of foreign currency. Over the past few weeks, US dollars have been depleting,” he said.

Importers have been facing challenges in accessing their nostro accounts to process their transactions because of limits set on the utilisation of foreign currency.

Mining royalties collections were 48,8% down the target.

It contributed US$14,7 million against a set target of US$28,9 million. Collections also declined 14,3% as compared to Q315.

Zimra attributed the poor performance of the revenue head to a slump in commodity prices and a decline on diamond volumes exported.

The forced merger earlier this year of Chiadzwa diamond mining companies Mbada Diamonds, Anjin Investments, Marange Resources, Diamond Mining Company, Kusena Diamonds, Jinan and Gye Nyame — to form the Zimbabwe Consolidated Diamond Company (ZCDC) had a devastating impact on diamond output.

The gem output has slumped, with ZCDC producing a mere 972 765 carats against a target of 6 million carats for the first six months to June 2016.

Corporate income tax, a total of US$102 million in the third quarter, was 5, 1% above the targeted US$97 million with actual collections growing by 19, 8 % compared to (Q3 2015).

“Corporate tax increase is due to debt recovery which was efficient during the period,” Mashakada added.

Although Value-Added Tax (VAT) on imports realised a total of US$89,7 million and exceeded the set target of US$86,9 million by 3,3%,the revenue head declined by 22,6% when compared to Q315.

VAT on local sales grew by 15,5% from US$136,2 million in Q315 to US$157,4% buoyed by an increase in the use of plastic money and improved voluntary compliance. The year-to-date revenue head has contributed US$440,1 million.

While individual tax contributed US$204 million, 0,9% up from the targeted US$202,2 million, collections were 4,4% above collections of US$195,4 million for Q315.

Zimra admitted that future collections on this revenue head remain bleak.

“Year-to-date collections amounted to US$555,4 million but generally the revenue head is not performing well due to job losses and failure to pay salaries by taxpayers. The situation is likely to remain bleak in the short term,” said.

Trade unions estimate that nearly 30 000 workers lost their jobs as a result of the July 2015 supreme court ruling while employers, after undertaking a survey, insist that only 9 115 workers lost their jobs as a result.

It remains a damning indictment of President Robert Mugabe and the Zanu PF government’s failure to create 2, 2 million jobs as promised in the ruling party’s 2013 election manifesto as the effect of rising unemployment on government revenue has been devastating.

Analysts say the haemorrhaging of jobs through retrenchments and company closures is a result of the deepening economic crisis characterised by a debilitating liquidity crunch as evidenced by the biting cash shortage, industry’s low capacity utilisation of less than 35% and declining foreign direct investment.

“Banks are running out of USD as people and companies are moving cash out for fear of bond notes. There is a confidence crisis on the market,” Mashakada opined.

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