'Zimra can raise over $8bn on increased tax compliance'

THE Zimbabwe Revenue Authority (Zimra) has potential to raise over $8 billion if it could achieve 100% tax compliance, over double the current rate, the Zimbabwe Coalition on Debt and Development (Zimcodd) has said.

Zimra is currently at around 30% tax compliance, but has still to surpass tax revenue targets.

In its second quarter fact sheet, Zimcodd said Zimra's tax revenues could more than double on tax compliance, holding economic growth and other variables constant.

"If Zimra is able to raise $2,411 billion at 30% tax compliance, it has the capacity to raise over $8 billion at 100% tax compliance. This is more than twice government expenditure for January to June 2018," Zimcodd said.

"This would mean additional funding for public services and achieving a budget surplus. It implies that the country has the potential to mobilise resources domestically and finance its own development, and redistribute through the allocation at least 5% of the national revenues raised in any financial year to provinces and local authorities as provided for under section 301, subsection 3 of the Constitution of Zimbabwe."

The organisation, which advocates for economic and social justice, noted that tax revenue collections exceeded the target by 21,84% and 15,09% during the first quarter and first half of 2018, respectively.

Zimra commissioner-general Faith Mazani says tax compliance in Zimbabwe is too low to support economic growth and has launched a campaign for voluntary compliance.

In a recent report, Zimra said that tax arrears increased from $3,93 billion at the beginning of the year to $4,227 billion by end of March, including unremitted value-added tax, half of which comprise penalties and interests.

Mazani said the authority had extended the six-month tax amnesty granted by government to tax defaulters, which lapsed on June 30, 2018.

The amnesty waived penalties and interest and will be rolled over, but only for those who voluntarily owned up and settled their accounts.

Zimcodd argues that government's failure to play its role in service delivery was one of the reasons driving down tax compliance.

"One would then wonder how Zimra is not only exceeding 2018 revenue targets, but rather surpassing 2017 figures. In an economy which is highly informal, the 300 000 registered tax payers is an underestimation," Zimcodd said.

"The scenario given by the Zimbabwe Revenue Authority implies that the unregistered small businesses and individuals are bearing the tax burden."

Zimcodd has urged Zimra to develop a simple and broad-based income tax system favourable for Zimbabwe based on both self-assessment system and official assessment in the medium to long term.

"In the short-term, Zimra should employ innovative measures of recovering the tax debt in addition to the ongoing window period for voluntary disclosure, notwithstanding the expiry of the amnesty on 30 June 2018," Zimcodd said.

It also recommended that punitive measures for discouraging future defaulters be developed simultaneously.

"This will compliment current efforts of rewarding tax compliant companies. The government should honour the social contract and develop clear accountability mechanism for the citizens in order to increase tax compliance," Zimcodd said.

The organisation also wants Zimra to upscale its efforts to expand the tax base by reducing tax incentives given to multinational corporations as well as find innovative and progressive ways to rope in the informal sector.