Leading beer and soft drink manufacturer Delta Corporation has revealed that it pays millions in taxes and duties but how those funds are used is beyond their control. What Delta is implying might just be the tip of the iceberg. How revenues collected through the Zimbabwe Revenue Authority (Zimra) are used has always been shrouded in a veil of secrecy. Perhaps now is the time to question how funds collected via Zimra are allocated.
Delta Press Release
In a Press Release entitled Mitigating Social Impacts of Alcohol, Delta Corporation says, ‘”Delta Corporation contributes to fiscal revenues through excise duty. Excise tax is an indirect tax levied on the sale of beer by government to assist it to curb the harmful use of beer and its related social impact. Government has a responsibility to ensure correct use of excise money collected from beer companies. On its part, the company continues to play its role in uplifting the livelihoods of the various communities within which we operate. In the financial year to March last year our contribution to the fiscus by way of Excise duty, VAT and Company Tax came to $141m.” In other words, Delta is saying we have done our part by paying taxes, however, if no money was allocated towards mitigating the harmful use of beer, that is a question only government should answer. The implication of this press release is that the money was not used as it should have been.
The work of Zimra
Zimra is mandated to collect revenue on behalf of government. The revenues they collect include customs duty, excise duty, value added tax, pay as you earn and others. As a way to increase revenue, government last year introduced the 2% Intermediated Money Transfer Tax and as expected, revenues rose in the 4th quarter of 2018. Total gross revenue rose from $3.97 billion in 2017 to $5.36 billion in 2018. This was more than the target of $4.3 billion. Unfortunately, it is not clear how this money was or is going to be used. Finance and Economic Development Minister Professor Mthuli Ncube said part of the proceeds from the 2% tax would be used to fund devolution and the remainder would fund education, health services and road repairs. Already, this is confusing because the Zimbabwe National Road Administration (ZINARA) is also mandated to provide funds for road repairs. In fact, the actual use of the 2% tax is not clearly defined. Something is wrong somewhere.
Let us remember that Zimbabwe has long been in debt. If we exceeded our revenue collection targets, this should not be happening. We should have enough money to be able to service our debt consistently. According to the 2019 National Budget Statement, our debt was US$17.69 billion as at end of August 2018. At the end of December 2017, the debt was around US$14.64 billion. Either we are not paying off our debt and it is accruing interest or we are borrowing more. It is worrisome that the actual debt figures are inconsistent as well. Permanent Secretary in the Finance Ministry, George Guvamatanga recently told Parliament’s Public Accounts Committee that an audit was underway to ascertain the country’s actual debt. This is a noble cause in terms of ending confusion but when we do make the money as we did at the end of 2018, we must pay off our debt. Currently it looks like the money is being used for other things.
What Delta Corporation is telling us is not something new. However, it is significant coming from one of the largest companies on the Zimbabwe Stock Exchange. Government needs to walk the talk. Diverting funds is what got us into this mess. A way out is now needed.