News / National
Zimra beats revenue targets again
19 Oct 2017 at 06:58hrs | Views
The Zimbabwe Revenue Authority gross collections for the third quarter were 19% above target boosted mainly by higher collections in Value Added Tax, individual tax, excise duty and company tax.
Gross collections for the quarter were US$1.03 billion translating to 19.25% above the target of US$863.56 million. Net collections, after deducting US$62.05 million in refunds amounted US$967.76 million was still 12.07% above target. The gross collections were 13.30% above the same period in 2016. The positive performance is attributable to higher collections in Value Added Tax (VAT) on local sales and imports, Individual Tax, Excise Duty and Company Tax.
"The major revenue heads performed well, surpassing set targets during the third quarter of 2017. The most outstanding being Company tax 30%, VAT on imports 23.77%, Net Customs duty 16.26%, Withholding tax on contracts 64.67%. Of great concern is the performance of Mining Royalties which was 24.35% below the set target despite improvements in mining revenues during the first nine months to September 2017. This subdued performance can be attributed to fluctuating mineral prices on the international market, foreign currency constraints that are negatively affecting production and the reduction of the rate of Mining Royalties on platinum effective April 2017," said Zimra in a statement.
Revenue collections (Q3, 17) were well over (Q3, 16) for all major tax heads with the exception for Individual Tax. The battery of revenue enhancement measures that ZIMRA is implementing to increase collections and stem leakages is getting the desired effect. Of note is the improvement in cashflow as a result of the newly introduced VAT withholding taxes for selected clients. The measures, including intensified risk-based audits, a crackdown on taxpayers in order to recover debt, automation and the fight against corruption, will continue into (Q4, 17).
Revenue performance in the first nine months of 2017 was higher than the same period in 2016, except for April and June. The smoothened line indicates that collections in 2017 have been maintaining a positive trajectory owing to the consistency in the implementation of revenue enhancement measures.
Individual Tax
For the period under review, this tax head contributed US$194.15 million. The collections were 1.54% above the target of US$191.21 million. Compared to the same period in 2016 where US$204.03 million was collected, revenue collections decreased by 4.84%.
The revenue head continues to be adversely affected by retrenchments, salary cuts and inconsistent salary payments by companies in the private sector and others in the public sector that rely on Government subvention. Government is heavily indebted to companies in both the private sector and public enterprises and its affecting this tax head. No change is expected in the short to medium term, other things remaining equal.
Company Tax
Total collections of US$112.03 million from Company Tax were 30.27% above the set target of US$86.00 million. During the same period last year, collections were US$102.03 million, indicating a 9.81%increase in revenue collections this year.
The positive performance of the revenue head is more attributable to increased compliance as a result of ZIMRA enforcement activities, than to improvement in company performance. The enforcement activities include intensified risk based audits, crack down on taxpayers and increased debt collections efforts that include appointment of agents, refund set offs, government setoffs and the negotiating and monitoring of payment plans. The first nine months of 2017 also saw some companies recording profits and this has positively affected the performance of this revenue head.
VAT on Local Sales
Gross VAT on Local Sales collections for the third quarter of 2017 were 41.80% above the target of US$168.10 million. After deducting VAT refunds of US$61.72 million, net VAT on Local Sales collections amounted to US$176.63 million, which was 5.08% above target. Net VAT on Local Sales for the period under review increased by 12.18% from the US$157.46 million collected during the same period in 2016.
The favorable performance of the tax head is largely attributed to ZIMRA's modernization initiatives such as Invoice Management System, Fiscalisation and E-filing. VAT compliance was also enhanced by the appointment of VAT withholding agents. Furthermore, the intensified VAT refund claims audits have been instrumental in reducing the VAT refunds bill for the period under review by 5.01% from US$64.98 million in same period last year, thereby enhancing the performance of the revenue head. A total of 12 992 SMEs registered under the moratorium and this is expected to boost the performance of this revenue head.
VAT on Imports
During the (Q3, 17), collections from VAT on Imports amounted to US$108.80 million against a target of US$87.90 million, which translates to a positive variance of 23.77% (US$20.90 million). The revenue head recorded a 21.16% increase in collections this quarter in comparison to US$89.79 million that was collected in the same quarter last year.
The performance of the revenue head is attributed to an increase in the importation of taxable supplies buttressed by the continuous and consistent supply of foreign currency by the RBZ to fund imports. The Electronic Cargo Tracking System has also buoyed the positive performance of this revenue head by curbing transit fraud.
Customs Duty
Net Customs Duty collections after deducting Customs refunds of US$35 290.10 stood at US$82.91 million against a target US$71.31 million. This translates to a positive variance of 16.26% (US$11.60 million). Compared to the same period in 2016, collections increased by 29.33%from US$64.10 million realised in the third quarter of 2016.
As with VAT on Imports, improvements in foreign currency supplies by the Reserve Bank of Zimbabwe enabled the increase in imports. The tax head's performance is due to ZIMRA's aggressive anti-smuggling stance that included intensified post-clearance audits, borderline patrols, roadblocks and the Electronic Cargo Tracking System that has been instrumental in combating transit fraud. There have been teething problems in implementing cargo tracking system, which include resistance by truckers and even ZIMRA officers, and shortage of seals. The seals have been increased but more is still needed and ZIMRA is in the process of acquiring more seals.
Excise Duty
Collections from Excise Duty were US$191.20 million against a target of US$169.24 million. This gives a positive variance of 12.97% (US$21.96 million). Revenue collections increased by 21.02% from US$157.99 million that was realised in the third quarter of 2016. Significant contributors under this revenue head were fuel (US$145.21 million), airtime (US$20.37 million) and beer (US$13.89 million).
The positive performance of the tax head was mainly due to improved compliance by fuel importers. Diesel importations increased by 20.83% from 194.00 million litres during the third quarter of 2016 to 234.41 million litres in the third quarter of 2017. This is a proxy of the success of the cargo tracking system. The Electronic Cargo Tracking System has been crucial in combating transit fuel fraud and has increased the submission of consumption declarations for fuel imports.
However, petrol imports declined by 54.19% from 106.62 million litres in the third quarter of 2016 to 48.85 million litres this year. This decline is due to the mandatory blending requirements, which now make use of a significant high local content in the form of ethanol produced in Zimbabwe. It could also be indicating the level of petrol smuggling under the cover of jet fuel but ZIMRA is closely monitoring these imports. The law should not allow smugglers to continue operating and should put more stringent penalties on commercial smugglers to deter others. Just paying duty and penalty is not enough.
A total of 4.97 million litres of paraffin was imported during the quarter. The introduction of Excise Duty on paraffin has also positively impacted on the performance of this revenue head. It should be noted, however, that household paraffin usage competes with other domestic sources of heating such as firewood, gas and charcoal as alternatives.
Withholding Tax on Contracts
A total of US$36.18 million was collected from Withholding Tax on Contracts, which is 64.67% of the targeted US$21.97 million. Revenue collections increased by 80.50% from US$20.05 million which was realised in (Q3, 16). The positive performance of the revenue head was mainly due to the efforts by ZIMRA to ensure the withholding and remittance of amounts withheld from traders who do not hold tax clearance certificates.
Carbon Tax
During the period under review, US$8.03 million (90.46%) was collected in Carbon Taxes against a target of US$8.88 million. Revenue collections increased by 0.50% from the US$7.99 million collected in the third quarter of 2016. Declines in petrol importations have negatively impacted on the performance of this revenue head.
Mining Royalties
The revenue head contributed US$16.59 million against a target ofUS$21.93 million, hence performing below target by 24.35%. However, compared to the same period last year, revenue collections increased by 12.14% from US$14.79 million realised in (Q3, 16). Zimbabwe like all developing countries needs to find a more equitable tax regime for the mining sector. There is need for more transparency and verification through rigorous audits of what is coming out of our ground and going outside. Apart from the precious metals which often use undesignated ports of entry, Zimbabwe needs to verify the exact quantity and composition of the ore going out of its borders. Currently, ZIMRA needs capital to put weighbridges at every border post. There is also need to invest in technology at the mines to monitor our resources. In the absence of local refineries, Royalties should be paid in ore so Government can process its own portion. This kills two birds with one stone, firstly Government benefits from all minerals in the ore which is of higher value and secondly prevents transfer pricing. Government could also be given information directly from external refineries for all ores processed abroad. ZIM-ASSET clearly articulates the need for and benefits of value addition, so we can no longer continue as before.
Dividends, Fees, Interest, Remittances
Collections amounting toUS$10.67 million were 47.19% below the set target of US$20.21 million. In the (Q3, 17), collections decreased by 28.87% when compared to the same period in 2016.The major contributor was Non-Resident Tax on Fees with a contribution of US$4.87 million (45.64%) to total collections. The performance of the revenue head can be attributed to improved profitability of companies and the positive performance noted on the Zimbabwe Stock Exchange.
Other Taxes
This composite revenue head comprises Capital Gains Tax and Capital Gains Withholding Tax, Tobacco Levy and Other Indirect Taxes (Stamp Duty, Banking Levy, Presumptive Tax and ATM Levy).
Collections of US$18.50 million were 10.01% above the set target of US$16.82 million. During the period under review, collections increased by 40.41% from US$13.18 million collected in the same period last year. Other Indirect Taxes were the major contributors to this revenue head.
Gross collections for the quarter were US$1.03 billion translating to 19.25% above the target of US$863.56 million. Net collections, after deducting US$62.05 million in refunds amounted US$967.76 million was still 12.07% above target. The gross collections were 13.30% above the same period in 2016. The positive performance is attributable to higher collections in Value Added Tax (VAT) on local sales and imports, Individual Tax, Excise Duty and Company Tax.
"The major revenue heads performed well, surpassing set targets during the third quarter of 2017. The most outstanding being Company tax 30%, VAT on imports 23.77%, Net Customs duty 16.26%, Withholding tax on contracts 64.67%. Of great concern is the performance of Mining Royalties which was 24.35% below the set target despite improvements in mining revenues during the first nine months to September 2017. This subdued performance can be attributed to fluctuating mineral prices on the international market, foreign currency constraints that are negatively affecting production and the reduction of the rate of Mining Royalties on platinum effective April 2017," said Zimra in a statement.
Revenue collections (Q3, 17) were well over (Q3, 16) for all major tax heads with the exception for Individual Tax. The battery of revenue enhancement measures that ZIMRA is implementing to increase collections and stem leakages is getting the desired effect. Of note is the improvement in cashflow as a result of the newly introduced VAT withholding taxes for selected clients. The measures, including intensified risk-based audits, a crackdown on taxpayers in order to recover debt, automation and the fight against corruption, will continue into (Q4, 17).
Revenue performance in the first nine months of 2017 was higher than the same period in 2016, except for April and June. The smoothened line indicates that collections in 2017 have been maintaining a positive trajectory owing to the consistency in the implementation of revenue enhancement measures.
Individual Tax
For the period under review, this tax head contributed US$194.15 million. The collections were 1.54% above the target of US$191.21 million. Compared to the same period in 2016 where US$204.03 million was collected, revenue collections decreased by 4.84%.
The revenue head continues to be adversely affected by retrenchments, salary cuts and inconsistent salary payments by companies in the private sector and others in the public sector that rely on Government subvention. Government is heavily indebted to companies in both the private sector and public enterprises and its affecting this tax head. No change is expected in the short to medium term, other things remaining equal.
Company Tax
Total collections of US$112.03 million from Company Tax were 30.27% above the set target of US$86.00 million. During the same period last year, collections were US$102.03 million, indicating a 9.81%increase in revenue collections this year.
The positive performance of the revenue head is more attributable to increased compliance as a result of ZIMRA enforcement activities, than to improvement in company performance. The enforcement activities include intensified risk based audits, crack down on taxpayers and increased debt collections efforts that include appointment of agents, refund set offs, government setoffs and the negotiating and monitoring of payment plans. The first nine months of 2017 also saw some companies recording profits and this has positively affected the performance of this revenue head.
VAT on Local Sales
Gross VAT on Local Sales collections for the third quarter of 2017 were 41.80% above the target of US$168.10 million. After deducting VAT refunds of US$61.72 million, net VAT on Local Sales collections amounted to US$176.63 million, which was 5.08% above target. Net VAT on Local Sales for the period under review increased by 12.18% from the US$157.46 million collected during the same period in 2016.
The favorable performance of the tax head is largely attributed to ZIMRA's modernization initiatives such as Invoice Management System, Fiscalisation and E-filing. VAT compliance was also enhanced by the appointment of VAT withholding agents. Furthermore, the intensified VAT refund claims audits have been instrumental in reducing the VAT refunds bill for the period under review by 5.01% from US$64.98 million in same period last year, thereby enhancing the performance of the revenue head. A total of 12 992 SMEs registered under the moratorium and this is expected to boost the performance of this revenue head.
VAT on Imports
During the (Q3, 17), collections from VAT on Imports amounted to US$108.80 million against a target of US$87.90 million, which translates to a positive variance of 23.77% (US$20.90 million). The revenue head recorded a 21.16% increase in collections this quarter in comparison to US$89.79 million that was collected in the same quarter last year.
The performance of the revenue head is attributed to an increase in the importation of taxable supplies buttressed by the continuous and consistent supply of foreign currency by the RBZ to fund imports. The Electronic Cargo Tracking System has also buoyed the positive performance of this revenue head by curbing transit fraud.
Customs Duty
Net Customs Duty collections after deducting Customs refunds of US$35 290.10 stood at US$82.91 million against a target US$71.31 million. This translates to a positive variance of 16.26% (US$11.60 million). Compared to the same period in 2016, collections increased by 29.33%from US$64.10 million realised in the third quarter of 2016.
As with VAT on Imports, improvements in foreign currency supplies by the Reserve Bank of Zimbabwe enabled the increase in imports. The tax head's performance is due to ZIMRA's aggressive anti-smuggling stance that included intensified post-clearance audits, borderline patrols, roadblocks and the Electronic Cargo Tracking System that has been instrumental in combating transit fraud. There have been teething problems in implementing cargo tracking system, which include resistance by truckers and even ZIMRA officers, and shortage of seals. The seals have been increased but more is still needed and ZIMRA is in the process of acquiring more seals.
Excise Duty
Collections from Excise Duty were US$191.20 million against a target of US$169.24 million. This gives a positive variance of 12.97% (US$21.96 million). Revenue collections increased by 21.02% from US$157.99 million that was realised in the third quarter of 2016. Significant contributors under this revenue head were fuel (US$145.21 million), airtime (US$20.37 million) and beer (US$13.89 million).
The positive performance of the tax head was mainly due to improved compliance by fuel importers. Diesel importations increased by 20.83% from 194.00 million litres during the third quarter of 2016 to 234.41 million litres in the third quarter of 2017. This is a proxy of the success of the cargo tracking system. The Electronic Cargo Tracking System has been crucial in combating transit fuel fraud and has increased the submission of consumption declarations for fuel imports.
However, petrol imports declined by 54.19% from 106.62 million litres in the third quarter of 2016 to 48.85 million litres this year. This decline is due to the mandatory blending requirements, which now make use of a significant high local content in the form of ethanol produced in Zimbabwe. It could also be indicating the level of petrol smuggling under the cover of jet fuel but ZIMRA is closely monitoring these imports. The law should not allow smugglers to continue operating and should put more stringent penalties on commercial smugglers to deter others. Just paying duty and penalty is not enough.
A total of 4.97 million litres of paraffin was imported during the quarter. The introduction of Excise Duty on paraffin has also positively impacted on the performance of this revenue head. It should be noted, however, that household paraffin usage competes with other domestic sources of heating such as firewood, gas and charcoal as alternatives.
Withholding Tax on Contracts
A total of US$36.18 million was collected from Withholding Tax on Contracts, which is 64.67% of the targeted US$21.97 million. Revenue collections increased by 80.50% from US$20.05 million which was realised in (Q3, 16). The positive performance of the revenue head was mainly due to the efforts by ZIMRA to ensure the withholding and remittance of amounts withheld from traders who do not hold tax clearance certificates.
Carbon Tax
During the period under review, US$8.03 million (90.46%) was collected in Carbon Taxes against a target of US$8.88 million. Revenue collections increased by 0.50% from the US$7.99 million collected in the third quarter of 2016. Declines in petrol importations have negatively impacted on the performance of this revenue head.
Mining Royalties
The revenue head contributed US$16.59 million against a target ofUS$21.93 million, hence performing below target by 24.35%. However, compared to the same period last year, revenue collections increased by 12.14% from US$14.79 million realised in (Q3, 16). Zimbabwe like all developing countries needs to find a more equitable tax regime for the mining sector. There is need for more transparency and verification through rigorous audits of what is coming out of our ground and going outside. Apart from the precious metals which often use undesignated ports of entry, Zimbabwe needs to verify the exact quantity and composition of the ore going out of its borders. Currently, ZIMRA needs capital to put weighbridges at every border post. There is also need to invest in technology at the mines to monitor our resources. In the absence of local refineries, Royalties should be paid in ore so Government can process its own portion. This kills two birds with one stone, firstly Government benefits from all minerals in the ore which is of higher value and secondly prevents transfer pricing. Government could also be given information directly from external refineries for all ores processed abroad. ZIM-ASSET clearly articulates the need for and benefits of value addition, so we can no longer continue as before.
Dividends, Fees, Interest, Remittances
Collections amounting toUS$10.67 million were 47.19% below the set target of US$20.21 million. In the (Q3, 17), collections decreased by 28.87% when compared to the same period in 2016.The major contributor was Non-Resident Tax on Fees with a contribution of US$4.87 million (45.64%) to total collections. The performance of the revenue head can be attributed to improved profitability of companies and the positive performance noted on the Zimbabwe Stock Exchange.
Other Taxes
This composite revenue head comprises Capital Gains Tax and Capital Gains Withholding Tax, Tobacco Levy and Other Indirect Taxes (Stamp Duty, Banking Levy, Presumptive Tax and ATM Levy).
Collections of US$18.50 million were 10.01% above the set target of US$16.82 million. During the period under review, collections increased by 40.41% from US$13.18 million collected in the same period last year. Other Indirect Taxes were the major contributors to this revenue head.
Source - zimra
