Inflation led salary increments spur ZIMRA earnings

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By Alois Vinga

THE continuous salary increases to cushion employees from the unbearable inflationary pressures have seen Zimbabwe Revenue Authority’s (ZIMRA) collections surpassing set targets by 27 % with salaried individuals emerging top revenue injectors among the taxed categories.

This comes at a time the country’s annual inflation is hovering at around 659 %, having surpassed 800 % this year in what saw the massive erosion of workers’ salaries whose earnings remained low in the face of price hikes.

In turn, employers are forced to keep adjusting salaries in a bid to cushion the workers, resulting in increases of Pay As You Earn Tax (PAYE) among other employee related deductions.

ZIMRA’s third quarter report states that gross collections stood at $58.81 billion, translating to 31.19% above the targeted $44.83 billion.

After deducting refunds of $1.81 billion, net collections came down to $57 billion. This gives a positive variance of 27.16% against the target.

The report acknowledges the positive impact brought about by the salary increments under the Individuals Tax category.

“The Individuals Tax Revenue head recorded positive performance due to continuous salary adjustments and cost of living adjustments that employers offered to their employees to counter rising inflation,” the report said.

Accordingly, individuals dominated the revenue list at 15.26%, Companies 14.63%, Excise Duty (14.17%), VAT on Local Sales 13.24% and VAT on Imports 13.08%.

From the Finance Ministry’s stipulated target of $4.2 billion, a total $8.6 billion revenue was collected during the period under review registering a positive variance of 103%.

“Customs Duties, which are usually among the top five contributors, only contributed 9.40% due to the impact of the lockdown on imports: only food, medicines, protective clothing and machinery were being imported, and these were mainly either duty free or subject to duty rebates,” the report said.

The authority exercised caution in granting tax incentives in the Mid Term Budget Review process as the impact of the Covid-19 pandemic was not yet clear enough.

“The need to maximise domestic revenue mobilisation in the given environment guided the level to which tax incentives could be granted when compared to what other nations could afford,” said ZIMRA.