The Zimbabwe Revenue Authority (Zimra) 2018 Annual Revenue Performance Report reveals that revenue collection surpassed target. Gross collections were at US$5.36 billion, 24.71% above the US$4.3 billion target for the year. This was spurred by fourth quarter collections which amounted to US$1.66 billion against a target of US$1.11 billion. Net collections for 2018 amounted to US$5.061 billion while fourth quarter net collections were at US$1.56 billion. We look at a few interesting points.
2% tax
While increased revenue collection has been attributed to a number of factors which include increased voluntary compliance, improved efficiency and effectiveness and price increases, the Intermediated Money Transfer Tax (IMTT) was a major contributor and game changer. IMTT amounted to US$18 693 438.51 in 2017 and this figure jumped 848.3% to US$177 266 319.04 in 2018. Taking into consideration that the 2% tax was only introduced in October 2018, we expect IMTT to contribute considerably in 2019 and beyond. Many complained that this tax was going to affect the already burdened citizens when it was introduced. As it stands, government is vindicated as the move is achieving the objective.
Excise duty
All revenue heads performed better in 2018 than in 2017. However, Excise duty was the highest contributor to the total collection for 2018. Against a target of US$815.31 million, actual excise duty collections clocked US$908.88 million. This translates to a 34.47% increase on the US$695.9 million recorded in 2017. According to Zimra, the main contributors were fuel, airtime and beer. Fuel contributed 71.34% of the total excise duty collections for the year. This was as a result of increased demand with cross border travellers preferring to fuel locally due to our flexible RTGS exchange rate. Customs duty also contributed meaningfully to total collections. This is due to increased demand for imported goods which was experienced at the height of basic commodity shortages towards the end of 2018.
What about US dollar collections?
Looking at the report, one can see that all amounts are in US dollars. However, this creates confusion. We know that Zimra collects foreign currency for vehicle imports and other selected goods. They also charge Vat in foreign currency for businesses charging their goods in forex. This leads us to the assumption that bond and RTGS collections are converted 1:1 to the US dollar for purposes of this report. In any case, government is adamant that the two are at par. In reality, the two are not at par. Further clarity may be needed on this issue going forward.
The above revenue collection figures are commendable. The 2% tax seems to be paying off. How the increased revenue will contribute to the economy will determine if we are on the right track. By their own admission, Zimra still needs to work on strengthening operational efficiencies, modernisation of systems, reduction of the debt bill and improved voluntary compliance. Corruption allegations have also been thrown around by members of the public. All these will have a bearing on how Zimra will build on the successes of 2018. We wait and see.
