Biti eyes $3,8bln tax revenue

HARARE - Finance minister Tendai Biti has projected to net over $3,8 billion in tax revenue next year to bolster the 2013 National Budget on the back of full fiscalisation achievement as well as promulgation of the new Income Tax Act.

Market watchers however, feel the forecast is ambitious considering that in July, Biti trimmed the 2012 budget from $4 billion to $3,6 billion and cut growth forecasts to 5,6 percent, from initial projections of 9,4 percent.

Zimbabwe has been operating on a cash budget principle since the early 2000s as donors continue to shun the country after the Bretton Woods Institutions — the International Monetary Fund and the World Bank — pulled the plug on the country, resulting in the termination of balance of payments support.

To date the Zimbabwe Revenue Authority (Zimra) has collected over $2 billion in tax collections against an initial set target of $3,4 billion. In his pre-budget strategy paper last week, the country’s purse bearer said the prevailing low levels of capacity utilisation in the economy have had the effect of limiting the potential of companies to honour their tax obligations.

“In 2013 and beyond, it is imperative that we take steps to improve revenue collections, benefiting from improved transparency, accountability, and good governance in the production, valuation and marketing of mineral resources.

“Improved revenue collection should also benefit from the achievement of full fiscalisation, as well as promulgation of the new Income Tax Act,” he said.

For 2012 the Finance minister had budgeted $600 million in revenue from Marange diamond sales, but only $30 million was remitted to the fiscus. Guided by a 30 percent to gross domestic product (GDP) ratio, Biti noted that tax and non-tax revenues in 2013 are projected at $3,8 billion, with individual revenue heads contributions to total incomes also estimated to remain largely unchanged.

Value Added Tax (Vat) and Pay As You Earn (Paye) are projected to lead, while some improvement in collections of non-tax revenue is expected.

Biti said the expected growth in Vat should benefit from increased compliance in the use of fiscalised machines and rolling out the fiscalisation programme to the remaining sectors during the course of the year 2013.

“On the other hand, customs duty will equally be boosted by completion of the automation programme at the Revenue Authority,” he said.

“This should minimise interface between customs officials and the public, going a long way in curbing corrupt tendencies. Contribution from customs duty and the mineral sector will also be enhanced through intensified efforts in plugging leakages at ports of entry and at the mines, respectively.”

Zimbabwe’s challenges in maximising collection of revenue in the short term include numerous tax expenditures notably in the mining and tourism sectors.

Developments so far since the beginning of 2012 indicate that these have gobbled up significant tax revenue resources. In an effort to promote investment and leverage the country’s growth potential, government has granted tax concessions to investors in various economic sectors, particularly mining, manufacturing and tourism.

While this has supported some companies recapitalise, much more could have been realised if significant medium term investment resources were in place.

The overall benefits to the economy have been weighed down by some of the resultant administrative challenges related to increased compliance costs, and added complexities to the tax system.

“In this regard, the 2013 Budget will seek to review some of the tax expenditures in order to harmonise and remove distortions in the tax system. Hence, as stakeholders ponder over their submissions, consideration should also be made for balancing the necessity of some tax concessions against the need to minimise distortions that might render the tax administration costly,” said Biti. - John Kachembere

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