The Zimbabwean economy remained under stress in 2016 due to a host of challenges militating against production, resulting in annual collections from company tax tumbling by close to 20% at the end of the year compared to the same period prior year, according to latest figures obtained from the Zimbabwe Revenue Authority (Zimra).
Corporate income tax debt grew by more than US$276,5 million as companies struggle to meet their tax obligations to close 2016 at US$751,49 million, compared to US$474,97 million in 2015. Corporate tax fell 19,77% from 2015 to contribute US$340,72 million on total collections during the year, which was 92,99% of the targeted US$366,4 million for 2016.
“The performance of the tax head can be attributed to low profitability and tax evasion by companies. Low profitability due to cash shortages, low industrial capacity utilisation, high cost of utilities and insufficient credit lines,” Zimra chairperson Willia Bonyongwe said in a statement. “However, most companies evade or avoid tax at all costs and the tax audits are revealing the extent companies go to avoid their tax obligations. The debt tends to rise steeply due to penalties and interest when the taxman catches up with the non-complying taxpayers. Again in 2017 the revenue head is expected to perform better due to the projected improvement in the economic environment and the efficiency measures by the taxman.”
According to statistics, at least 236 companies had shut down by August last year.
Underperformance of tax heads resulted in the country missing its annual revenue collection targets by US$145 million.
Underperformance of all revenue heads except for value-added tax on imports, as the economy suffers from deindustrialisation after hundreds of companies shut down over the years costing thousands of citizens formal employment, saw the country’s revenue collector missing its US$3,607 billion target by 4% to collect US$3,462 billion in 2016.
The gap between targets and actual collections narrowed in 2016 after the revenue collector made more modest predictions. In 2015 Zimra collected US$3,5 billion which was about US$200 million below target.
“The major driver to revenue collection is always the performance of the economy, but unfortunately the economy performed badly again in 2016,” Bonyongwe said.
“The 2016 target was, therefore, missed by 4%. Despite the Ministry of Finance revising the Gross Domestic Product (GDP) growth figure by almost half, the Zimra target remained the same and the performance is testimony that the revenue authority is going in the right direction,” she added.
Net collections went down by 7,22% in relation to the same period in 2015, which Zimra says should be reviewed in light of 2,7% GDP growth in 2015 compared to 1,2% in 2016.
Bonyongwe said net collections amounted to US$3,248 billion but were 91,05% of the target due to an upsurge in refunds in Q3 and Q4 which the revenue collector is investigating.
Zimra said 2016 started with a debt of US$1,97 billion, which accumulated to US$2,67 billion at the close of 2016.
“The figure does not include US$1,11 billion, which is the amount that was recovered in 2016 from outstanding debt. The growth in debt reflects the new debt arising from assessments done due to automation either from previous under-declarations and evasion as well as inability to pay by taxpayers,” Bonyongwe said.
“Most people do not take their tax obligations seriously and due to corruption have gotten away with it in the past but the system has caught up with them. There is also a noticeable increase in litigation from non-compliers and we hope that the judiciary will allow these cases to be heard fast and we commend the introduction of the Fiscal Court in this regard,” she added.
Gross collections for the fourth quarter amounted to US$893,89 million, which was 95,59% of the targeted US$935,17 million while net collections after deducting refunds of US$50,15 million from the gross collections were US$843,74 million.
However, the Zimra chair said, there was a 12,1% decline in net collections in Q4 2016 compared to the same period in 2015 and the most affected tax heads being customs duty, excise duty, mining royalties and PAYE
Customs duty collections amounted to US$27,91 million, which was 74,29% of the targeted US$368,70 million due to customs duty reliefs, which include rebates, suspensions and trade agreements, amounting to US$858,30 million.
Revenue from excise duty collections were 85,18% of the target after a decline in the consumption of other excisable products due to low disposable income as well as a reduction in the import volumes of petroleum products in 2016 as compared to 2015.