By Robert Tapfumaneyi
ZIMBABWE Revenue Authority (ZIMRA) collections maintained a positive trajectory in nominal terms despite the adverse operating environment that has been exacerbated by the Covid-19 pandemic in the second quarter.
In a recent report, the tax authority said the second quarter of 2020 was characterised by a widening gap between official and parallel market exchange rates as well as rising inflate.
The report is for the Second Quarter ending 30 June 2020.
“Net revenue collections during the second quarter of 2020 amounted to ZWL$20.11 billion against a target of ZWL$14.09 billion,” Josephine Matambo Zimra board vice chairperson said while presenting the report.
“This translated to a positive variance of 42.75%.
“Net revenue collections grew by 542.24% in nominal terms from ZWL$3.13 billion that was realised in the same period in 2019.
“While all revenue heads registered positive growth in nominal terms, in real terms there was no growth.
“All revenue heads performed above 2019 levels in nominal terms because of the hyperinflationary environment that the country is experiencing.”
The revenue enhancement strategies that the Authority is implementing are expected to improve collections in real terms as the benefits begin to manifest.
“Such strategies include effective debt management, risk-based audits, anti-smuggling activities, post clearance audits, and improved business processes,” she said.
“During the second quarter of 2020, these strategies were curtailed by the Covid-19 pandemic restrictions.”
Major contributors to revenue were companies (21%), individuals (17%), excise duties (15%) and VAT on local sales (10%).
On companies, the revenue head recorded a positive performance mainly due to the nominal profits being recorded by most businesses as a result of the hyper-inflationary environment.
The Authority’s compliance enforcement programmes also ensured sustained compliance under the difficult conditions of the lockdown.
The report said though revenues dropped below target in April 2020, the eased lockdown conditions in June boosted revenue collections as more businesses resumed operations.
On individuals, the report said the revenue head registered a positive performance, mainly buoyed by cost of living adjustments, interbank rate adjusted salaries and cushioning allowances paid by most companies to cushion their employees against the hyperinflation.
VAT on local sales, the revenue head missed the set target after deducting refunds amounting to ZWL$1.49 billion.
“This unprecedented refund level was a deliberate tax administration measure on deserving claims to mitigate cash flow challenges for businesses during this Covid-19 environment,” she said.
“However, the revenue head’s performance in gross terms was positive mainly due to the high inflation and depreciation of the exchange rate that pushed the prices of most goods upwards.”