Small Businesses, Individuals Bear Zimbabwe’s Tax Burden

Small Businesses, Individuals Bear Zimbabwe's Tax Burden

A coalition says low Zimbabwe Revenue Authority (ZIMRA) tax compliance is a serious threat to people’s disposable incomes as the government relies heavily on indirect taxes.

Zimbabwe Coalition on Debt and Development (ZIMCODD), in its “Second Quarterly Fact Sheet” says ZIMRA is on record exceeding tax revenue targets albeit the current economic hardships and very low tax compliance which is below 30%.

“In an economy which is highly informal, the 300 000 registered taxpayers is an underestimation,” ZIMCODD says.  “The scenario given by the Zimbabwe Revenue Authority implies that the unregistered small businesses and individuals are bearing the tax burden.”

“The tax revenue collections exceeded the target by 21.84% and 15.09% during the first quarter and the first half of 2018 respectively. Ironically, the tax debt owed to the Zimbabwe Revenue Authority (ZIMRA) ballooned from US$3.93 billion at the beginning of the year to US$4.227 billion by end of March 1. One would then wonder how ZIMRA is not only exceeding 2018 revenue targets but rather surpassing 2017 figures.”

The coalition also says the implications of low tax compliance on debt are appalling as the government resorts to treasury bills to finance the deficit.

“As of June, the cumulative budget deficit stood at US$1.34 billion against a target of US$266 million,” ZIMCODD says.

“This deficit is largely financed through the issuance of treasury bills (to both banks US$635.6million and non-banks 736.7 million).”

Minister of Finance, announcing fiscal measures to restore macroeconomic stability, said that the government will limit the central bank overdraft facility in line with section 11(1) of the Reserve Bank Act [Chapter 22:15] which states that borrowing from the Reserve Bank shall not exceed 20% of the previous year’s Government revenues at any given point.

ZIMRA’s collection exceeding targets across almost all the revenue heads is reflective of price distortions in Zimbabwe, which is prompting people to purchase basic commodities outside the country according to the coalition.

“The other possibility is that people’s disposable incomes continue to shrink and more people continue to lose their jobs on a daily basis,” ZIMCODD says.

“This is revealed in the individual tax which fell short of the half-year target of 419.28 million by 0.68%.”

“Even though individual tax fell short of the target, revenue collections grew by 19.86% from the US$347.41 million realized during the same period last year,” ZIMCODD continues.

ZIMCODD discusses a tax burden on small businesses and individuals as the Finance Minister reviews the Intermediated Money Transfer Tax from 5 cents to 2 cents per dollar transacted.

“If the Zimbabwe Revenue Authority is able to raise US$2.411 billion at 30% tax compliance, it has the capacity to raise over US$8 billion at 100% tax compliance,” ZIMCODD says. “This is more than twice government expenditure for January to June 2018.”

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