Revenue collections went up by 8% in the first six month of the year compared to the same period last year, Zimra’s latest reports shows. At $1.79bn revenue collected was above the set target for the six months period at $1.66bn. Efficiency in revenue mobilization was the major driver of performance in the period. Zimra implemented the Electronic Cargo Tracking System, enhancement of invoice management systems as well as augmentation of the fiscalisation system to drive collections. Corporate tax revenue head which is taxation on corporate earnings was the major overall revenue growth driver in the 6 months period. It outperformed target by a massive 36.48% to $214.3 million while growing by a wider margin of 48%.
Mining royalties outperformed target by 23% while going up by a moderate 3% against the actual half year 2016 level. The state sacrificed royalties to drive output hence forecasting a higher sectoral growth driven by volumes surge. Zimra attributed the decline in individual tax to salary cuts, retrenchment and irregular salary payments by some companies. The authority expects performance of the revenue head to improve driven by SMEs contributions. ZIMRA believes that revenue collections could easily beat the $6 billion mark against the current projected $3.4 billion given the level of economic activity in the country.
Thoughts…
Consolidation efforts by ZIMRA will continue to induce revenue growth in the near term and the initiatives pursued by the authority in that pursuit are commended. Fiscalisation of the tax system positively impacts on efficiency while in turn efficiency yields improved aggregate revenue performance through value creation and preservation.
As ZIMRA correctly noted this is only one side of the performance matrice the other and more weighty being economic performance. The 2 factors therefore potentially drive revenue performance. While economic performance has the propensity to keep rising, efficiency enhancement has limited upside it is therefore not a sustainable way of growing revenue.
We are likely to see a moderation of the efficiency impact on revenue beginning 2018, and revenue performance will largely be guided by economic performance which is fundamentally driven. The softening earnings and the evident shrink in aggregate demand will exert downward s pressure to revenue prospects. The economy is however expected to record an improved growth rate in the current year and the following year respectively. The growth weight will be largely skewed towards agriculture and we do not see much ripple effect to other sectors hence limiting the impact of growth on broad revenue stimulation.
