THE government is working on a cocktail of fiscal and monetary policy interventions to compel companies to pay taxes amid heightened concerns that evasion and avoidance of levies by corporates has bled the economy into its current crisis, businessdigest has learnt.
High-ranking government officials said Finance minister Patrick Chinamasa was concluding an exercise meant to introduce punitive measures, through the fiscal policy, to tax offenders early this year as part of efforts to discourage tax offenses at a time government revenues continue to dwindle.
Fiscal tools, said a top official in the Treasury chief’s office, will include measures to improve tax collection from the informal sector “bearing in mind that the country’s economy is getting more and more informalised each day”.
The government, added the source, has also tasked Reserve Bank of Zimbabwe governor John Mangudya to come up with measures, in his 2016 Monetary Policy Statement that is also expected this month, to improve tax collections.
“The issue is that there is just no discipline in this market and we will crack the whip this time so that there is discipline,” said a government official, who requested not to be named, adding, “When you are caught doing 80km per hour at a 60km per hour zone, traffic officers will charge you a US$20 fine and if you are doing 100km/h on the same zone you pay more.”
Another source at the Zimbabwe Revenue Authority (Zimra) said the government agency noted with concern how some big companies are devising methods to evade taxes.
“Even big companies are finding ways to informalise and evade taxes and we are well aware of this. Now we are finding big companies telling Zimra that their computer systems are down when they are doing things manually. They know very well that Zimra is short-staffed and cannot go through everything that is done manually so that they get away with cooking books,” a well-placed source said.
This comes as the central bank is seeking ways to deal with illicit financial flows mostly in the form of tax evasion and avoidance.
According to Zimra, Zimbabwe missed its revenue collection target by 6% in 2009 before surpassing it by 15% in 2010. Growth was maintained in 2011 when the country collected US$2,8 billion — 11% above target.
Zimra managed to surpass its collection targets by 7% to collect US$3,45bn in 2012 before missing its 2013 collection targets by 6%. In 2014, the situation appeared to have improved with gross collections for the year amounting to US$3,84bn against a target of US$3,82bn, resulting in a positive variance of 1%. However, fourth quarter net collections for 2015 were US$996,94 million against a target of US$1,11bn, translating to a negative variance of 10%.
Zimra figures for the third quarter of 2015 show a country in dire straits as net collections of US$878,22m, which is 91,1% of the target of US$964m. The revenue collector said there was a 0,71% decline in net revenue collections from the same period last year where US$884,46m was realised.
“Net cumulative revenue collections as at 30 September 2015 amounted to US$2,54bn which is 67,54% of the 2015 annual target of US$3,76bn. This translates to an 8,55% decline in revenue collections as compared to the same period last year where the cumulative revenue collections were US$2,78bn,” said Zimra chairperson Willia Bonyongwe.
The performance followed a 3,75% negative variance in individual tax targets, a 15,43% variance on Vat on local sales as well as negative 10,68% variance on customs duty. Company tax missed collection targets by 31,34% while mining royalties also missed the targets by 55,62%
Zimbabwe’s manufacturing sector saw a drop in activity between 2011 and 2014 with at least 4 610 companies closing shop, resulting in a loss of 55 443 jobs according to the 2015 national budget statement. In 2015, Treasury said more than 80% of workers are employed in the informal sector.
Author: Taurai Mangudhla
Source: The Zimbabwe Independent