Zim moves to curb tax leakages

HARARE - Finance minister Patrick Chinamasa says the country is now at an advanced stage of launching a pilot programme meant to explore avenues of curbing tax leakages.

Chinamasa told delegates at the launch of the African Capacity Building Foundation report in Harare yesterday that the move was aimed at increasing the authority’s dwindling revenues as the country concentrates on internal resource mobilisation.

“Our tax authorities, Zimra, are currently implementing a fiscalisation pilot project to enhance revenue collections through curbing Value Added Tax (Vat) leakages,” he said.

Vat is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale.

In Zimbabwe, it is not a precondition for anyone to first register for Vat before entering into business agreements, transactions or arrangements of their choice.

Chinamasa said the pilot project was going to see the tax collector establishing a data base that would be linked to the Reserve Bank of Zimbabwe and the ministry of Finance.

“The initial database shall have at least 3 000 participants and will link Zimra up with Treasury and the central bank. This will understand a real-time understanding of revenue inflows into the Consolidated Revenue Fund,” the Treasury chief said.

Chinamasa said the first pilot project would be rolled out in the first half of 2016.

He said the move had been necessitated by the tax leakages currently being recorded as some traders opt not to pay their tax dues.

“We have realised that some traders are getting away with murder where taxes are concerned, so after the success of the pilot every trader is going to find themselves on this database and will be closely monitored to ensure obligations are met,” he said.

This comes as latest figures released by the taxman for the third quarter of 2015 showed Zimra only collected 91,1 percent of its $964 million target at $878,22 million.

The revenue collector said there was a 0,71 percent decline in net revenue collections from the same period last year, where $884,46 million was realised.

Data from the tax collector also showed that this performance followed a 3,75 percent negative variance in individual tax targets, a 15,43 percent variance on Vat on local sales as well as negative 10,68 percent variance on customs duty as company tax missed collection targets by 31,34 percent while mining royalties also missed the targets by 55,62 percent.

The decline in revenue collections and failure to meet targets has been attributed to a growing informal economy which is difficult to tax with government estimating small and medium enterprises account for about 40 percent of the country’s GDP.

However, despite economic growth projections being revised downwards to 1,5 percent this year, Chinamasa anticipates a 2,7 percent growth in 2016, which he says will also translate to better revenue collections.

Meanwhile, Zimra Commissioner Domestic Taxes Happias Kuzvinzwa said while the tax collector had penetrated the informal sector with presumptive tax collections, taxing the informal sector remained an uphill task.

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