The Zimbabwe Revenue Authority (ZIMRA) has just released its third-quarter revenue collections data. The revenue target for the third quarter was ZWL$6 billion and ZIMRA managed to exceed that target by ZWL$590 million. The data shows that in comparison to the same quarter last year petrol imports have gone down whilst diesel imports have slightly gone up. Last year in the third quarter petrol imports were 130.49 million litres yet this year it was 106.66 million litres. As for diesel, the slight jump was from 265.46 million litres to 267.26 million litres this year. The infamous 2% tax led to revenue collections totalling ZWL$661 million in the just-ended third quarter. That fell short of a set target of ZWL$692 million that had been projected for the third quarter. Since the beginning of the year, ZWL$11.48 billion in revenue has been cumulatively collected by ZIMRA (exceeding the set target by ZWL$960 million).
We Are Running On Fuel, How So? You May Ask
I am sure if you have been following on fuel price increases you will notice a recurring trend. Whenever ZERA announces new fuel prices they always say that the figures take into account revised excise duty representing the FOB. For those who do not know FOB stands for Free On Board or Freight On Board. ZERA says it is a charge in the fuel-cost-build-up as determined by international market forces at the port of delivery for the fuel. This is simply the cost of getting the fuel from the nearest port into the country.
How those factors keeping changing to justify their near-weekly fuel price hikes yet it is not the same in other neighbouring countries who collect their fuel from the same ports is quite surprising. Anyways I am saying all this to get to my next point. ZIMRA has exceeded third-quarter revenue collection targets due to increased tax from petroleum products. Excise duty from fuel has emerged as the major reason for the high revenue collections realized in the third quarter. So in essence fuel has become their main avenue for revenue collections which in itself casts shadows on justifications that have been cited for the incessant fuel price hikes. I say this because it is questionable whether reasons cited for fuel price increases are valid or they are just excuses for ensuring that they exceed their revenue collection targets.
This Development Is Quite Telling
Here is why I am sure there was a time when the tables shifted regarding fuel prices. It has always been the norm that petrol costs more than diesel but now diesel costs more than petrol. How did that shift happen all of a sudden and what led to that? One might assume that this was borne out of the realization that diesel import volumes are much higher petrol. I mean, 256.46 million litres of diesel were imported in this year’s third quarter against 106.66 million litres of petrol. Hypothetically, if you want to earn more revenue you would push the price of diesel up to maximize on its high import volumes.
The fact that revenue realized from fuel imports are dominating ZIMRA collections is not something to be necessarily celebrated I think. It is indicative of how much the economy is struggling because surely there are many other avenues that should be topping the list when it comes to revenue collection. The fact that ZIMRA is now banking on fuel imports more than anything shows that there is a lot of informal trading in the country. It gives light to the reality on the ground that money is circulating outside the formal system. It also shows that there are so many people, institutions, organizations, and business amongst others that are skirting their responsibilities of paying taxes and the like.
When you put everything together it is not surprising why the operating environment has become hyperinflationary. Fuel obviously is a major trigger to price hikes due to its central role in all facets of society. Thus incessant fuel price hikes add fuel to the fire of inflation and price distortions. Since this third-quarter revenue collection data has proven the efficacy of ZIMRA exceeding collection targets through leveraging on fuel we can surely expect to continue seeing fuel price hikes.