It’s the economy, stupid: Zimra

The Zimbabwe Revenue Authority (Zimra) says the tough economic environment affected the performance of revenue heads in 2016, resulting in the tax collector missing its target for the year.

Source: It’s the economy, stupid: Zimra – NewsDay Zimbabwe January 20, 2017

BY TATIRA ZWINOIRA

Net collections, 7,22% down at $3,24 billion from the 2015 figure, were affected by an upsurge in refunds in the third and fourth quarter of the year. Annual gross collections amounted to $3,462 billion, which was 96% of the targeted $3,607 billion.

Individual and corporate tax revenues were down by 5,31% and 19,77%, respectively, due to a continued decline in the business environment in the country.

In an analysis of the collections, Zimra board chairperson, Willia Bonyongwe said the individual tax collection was 91,82% of the targeted projection.

“Collections under this revenue head amounted to $736,53 million, which is 91,82% of the targeted $802,14 million, translating to a decline of 5,31% from the $777,83 million collected in 2015. The pay as you earn debt as at the end of the year was $662,16 million, compared to $591,89 million in 2015,” she said.

“The negative performance of the revenue head is attributed to salary cuts, most companies reviewed their remuneration packages downwards. Company closures and retrenchments also resulted in the revenue head failing to meet the target for the year.”

For 2017, the Employers’ Confederation of Zimbabwe predicted that job growth and current salaries would go down due to companies losing revenue as demand for goods and services continues to decline.

Bonyongwe said in the absence of any significant foreign direct investment, the economy had low investment levels, declining levels of employment and low income levels.

“Consequently, aggregate demand for goods and services continued to fall and this had an adverse impact on all tax heads during the year but particularly during the fourth quarter of 2016,” she said.

Revenue from company tax was, as a result, $340,72 million of total collections during the year under review, which was down 19,77% from $424,68 million in 2015. Zimra reported that this was a missed target by 7,01% from an expected $366,40 million.

Further evidence of companies’ declining revenues was Zimra reporting a corporate income tax debt of $751,49 million, which was an increase of about 37% compared to $474,97 million in 2015.

She said this performance was due to low profitability due to cash shortages, low industrial capacity utilisation, high cost of utilities and insufficient credit lines.

Another major reason was tax evasion, which analysts say is now a survival mechanism for companies.

“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,” she said.

Bonyongwe said the operating environment was expected to improve in 2017 due to the lifeline of Statutory 64 of 2016 to local producers and the impact of a good agricultural season.

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