Grim tax stats, time for urgent action

HARARE - Last week, tax collector Zimbabwe Revenue Authority (Zimra) announced that tax arrears — owed mainly by privately-owned enterprises — had ballooned to $2,58 billion in the first quarter of 2016 from $1, 97 billion in the previous year.

The authority’s chairperson, Willia Bonyongwe, said the private companies contributed over 70 percent to the national tax debt while government had an outstanding debt of 0,18 percent, with municipalities, parastatals and State-owned entities arrears amounting to 26,77 percent. Consequently, the revenue collector missed its first quarter target by 15,89 percent after collecting $725 million from a target of $862 million.

This is despite several tax amnesties — negotiated payment plans — that were extended by Zimra last year, whose uptake was sadly low as the private firms are buckling under immense economic pressure.

In her own admission, Bonyongwe said: “Zimbabwe’s economy is obviously going through troubled waters. The economy needs a big push to stimulate sustainability,” adding that efforts were being made to attract foreign capital inflows.

But what she said is not entirely new.

In 2014, suspended Zimra commissioner-general Gershem Pasi warned that Zimbabwe had to brace for tougher times ahead on the back of poor revenue generation. He advised that Zimbabwe was “headed for a serious shrinkage of revenue unless something is done soon to increase revenue in the country”.

At the time, Pasi said it was “a miracle” Zimra had managed to surpass the first quarter target”

Bonyongwe’s remarks, coupled with Pasi’s, certainly paint a gloomy picture for Zimbabwe’s outlook, especially considering that the country’s government has for long been reliant on tax collections for survival. What this calls for, are real and pragmatic solutions by President Robert Mugabe and his administration. For some time, government has financed its endless expenditure, including paying its bloated civil service, through money garnished from companies’ accounts by the tax collector. But that remains only a stopgap measure.

Surely, this country cannot survive and finance its shoe string $4 billion budget through raiding companies’ accounts. The companies are equally pressed, and even struggling to pay their employees.

Like Bonyongwe highlighted that moves were being made to attract foreign capital; that is part of the key solutions to Zimbabwe’s economic problems.

Mugabe’s governing Zanu PF must create an environment conducive enough to attract meaningful investment. There is need for policy consistency and certainty, respect of the rule of law and property rights in order to rebuild investor trust.

No investor in their right state of mind will commit their capital in such a volatile and unstable environment. Sadly, Mugabe and his party are so absorbed and concerned about factionalism.

We need solutions Mr President. The country is burning.

Comments (1)

Well, why pay tax? To who and for what when government itself is not paying its employees?

UnBanked - 17 May 2016

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