ZIMRA recently released its Revenue Performance Report for the January to March 2019 period. Much of the surge in revenue collections has been attributed to the 2% IMTT (Intermediate Money Transfer Tax). Roughly 15% of total gross revenue collections since October last year have been realized from the 2% tax. The controversial tax was introduced in October 2018. Initially, the Finance minister had enacted an upward review from 0.05 cents per transaction to 5% for every electronic transfer. He, later on, had to review that downwards to 2% to curtail price hikes that had taken centre stage and to cool down tempers. To further cool down tempers he then exempted certain transactions from the 2% tax. Let’s take a look at the ZIMRA report.
2019 Q1 Overview
The 2% IMTT raked in approximately RTGS$282.84 million dollars against the target of RTGS$150 million. Gross revenue collected totalled RTGS$2.059 billion against a target of RTGS$1.455 billion. After certain deductions, the net revenue collected was actually RTGS$1.944 billion surpassing the target by 33.62%. The surge has been said to be due to IMTT and excise duty. I’ll just highlight the revenue stats for Company Tax, VAT for local sales and VAT for imports, to mention a few. For Company Tax, the gross revenue collections amounted to RTGS$242.08 million against a target of RTGS$172 million (exceeding the target by 40.74%). Local sales VAT grossed in RTGS$336.7 million in revenue exceeding a target of RTGS$308.1 million by 9.28%. Imports VAT raked in RTGS$127.27 million against a target of RTGS$117.60 (exceeding the target by 8.23%). The exchange rate movement and shift to RTGS$ as a unit of account can take credit for some of the increments.
Comparative Analysis With 2018 Q1
Here I’ll point out the comparisons as stated by ZIMRA though I feel there are some anomalies. Earlier I mentioned that IMTT raked in RTGS$282.84 million for Q1 2019; Q1 2018 the same IMTT realized a $5.21 million (not sure whether to call them USD or RTGS$ because a policy change hadn’t been affected to disregard the 1:1 issue). The other thing also is that 2% tax wasn’t yet existent in Q1 2018 so it becomes quite problematic to make comparisons of the two quarters. ZIMRA reports a 5333.99% surge from Q1 2018 IMTT collections to Q1 2019 collections – but is this a valid comparison to make? Excise duty realized approximately RTGS$233 million in Q1 2018 and raked in RTGS$566 million for Q1 this year. This denotes a 142% increase which has been attributed to an increase in fuel import duty and demand. Company Tax amounted to RTGS$128.55 million for Q1 2018 (thus in comparison to this year, there is an 88.31% increase). The VAT on local sales was RTGS$265.699 million for Q1 last year was translated into a 26.7% increase for Q1 this year. Import VAT amassed RTGS$123.14 million last year and in comparison to Q1 this year there has been a 3.36% increase. In fact, are all these comparisons valid? Give us your thoughts in the comments below.
Assuming these figures are in RTGS$ based on the last MPS presented by the RBZ Governor – he indicated the budget was to be denominated in RTGS$ per SI 33 of 2019. Ideally, there is a problem in making these comparisons because in Q1 last year, RTGS$ didn’t formally exist, the Interbank exchange rate wasn’t yet in effect. The other aspect is that of inflation which has been increasing from time to time (particularly the year-on-year inflation rate). For instance, working with a 67% inflation rate on gross revenue collected for Q1 2019 the gross total would become RTGS$1.03 billion against a target of RTGS$1.455 billion. This would mean ZIMRA’s revenue collection actually fell short of the target by approximately RTGS$430 million. The mere fact that such factors seem silent in the report and that there is no footnote or indication of whether or not the figures are denominated in USD or RTGS$ is quite telling. It’s problematic to infer trends and comparisons in an environment like ours where there is a barrage of policy changes over time and also the scourge of hyperinflation.
As is apparent from the report and remarks that have been made by the Finance minister, it seems they are celebrating these increases and exceeding targets as accomplishments. When you look at it it’s more like celebrating failure under the cover of success. Prices have been increasing, excise duties have been increasing, electronic transactions have become the order of the day and the RTGS$ has been losing value. All these have been borne out of inflation and it’s no wonder why figures have been going up. So an applauding of these statistics is akin to somehow celebrating inflation as an accomplishment. Most Zimbabweans aren’t really impressed by these stats because they are far removed from any corresponding betterment of people’s lives on the ground.
ZIMRA says revenue performance is anticipated to maintain a positive trajectory. They also plan on increasing sector compliance, signing up more taxpayers, reducing tax debt and tackling corruption through audits and investigations. I still think it would be expedient for them to avail stats that reflect the periodic policy changes and the inflation rates.