News / National
Zimra misses Q1 revenue target again
12 May 2016 at 06:47hrs | Views
DEPRESSED industry output coupled with a tight liquidity situation and drought eroded Zimbabwe Revenue Authority (Zimra)'s earnings for the first quarter of 2016 to $724.9 million from a target of $861.8 million.
The tax authority missed its target by $136.9 million with board chair Willia Bonyongwe yesterday admitting "poor performance", which she attributed to a variety of bottlenecks.
"Gross collections for Q1 (2016) amounted to $782.00 million and refunds, consisting of Value Added Tax (VAT) and Customs Duty, stood at $57.11 million. This gave rise to net collections of $724.89 million. Net collections were 84.11 percent of the targeted $861.83 million and recorded a decline of 9.75 percent when compared to Q1 2015," said Bonyongwe in a statement accompanying her report.
"The bulk of the revenue for 2016 was realised from Individual Tax (23.10 percent) followed closely by Excise Duty (22.13 percent). VAT on Local Sales contributed 18.08 percent while VAT on Imports contributed 11.55 percent. The remainder of the revenue came from the rest of the revenue heads."
She said Zimra was struggling to restrain the tax debt, which rose by 30.9 percent from $1.97 billion at the end of 2015 to $2.58 billion by the end of first quarter 2016.
"The breakdown of this debt is 0.18 percent government, 26.77 percent municipalities, parastatals and state owned entities, and 73.05 percent private entities. The debt is composed of 53.12 percent principal, 20.23 percent penalty and 26.65 percent interest," said Bonyongwe.
The Zimra board chair attributed the decline to the economic environment, which has remained harsh, even worsened by the shift in the rainy season, and the inadequate rainfall due to the El Nino phenomenon.
She said drought had adversely impacted on the whole economy because of the intricate linkages between the agricultural sector and the rest of the economy.
Further, she said, the liquidity situation worsened, depressing the operations of the few companies still functional thus leading to even lower industrial capacity utilisation.
"Companies continued to downsize and closures continued, giving rise to more job losses. Company profitability was also softened in the main," she explained.
The report indicates actual revenue collected across all revenue heads was below target, and "disappointingly" below first quarter 2015 levels, with the exception of VAT on local sales, DFIR and other taxes.
Bonyongwe also blamed non-compliance by taxpayers, corruption and lack of complete automation for failure.
"Some taxpayers don't pay their tax in full, and others do not pay their tax at all. ZIMRA will in Q2 (2016) enhance measures to improve taxpayer compliance," she said.
VAT on local sales notably increased from 14 percent in Q1 (2015) to 18 percent in Q1 (2016) and is expected to exceed 25 percent contribution with automation and greater compliance. Individual Tax and Company Tax declined by two percent whilst Excise Duty rose slightly by a percentage point to 22 percent.
VAT on Imports and Customs Duty dropped by a percentage point to 12 percent and nine percent respectively.
Bonyongwe said individual tax collections amounted to $167.43 million, which is 85.42 percent of the targeted $196 million having suffered a loss of 16.36 percent down from the $200.18 million that was collected in Q1 (2015).
"This reflects the impact of job losses and also pay cuts for those still in their jobs as companies struggle to survive. A number of companies no longer have bonus payments which are normally paid during Q1 when the annual performance is finalised," she said.
"The Pay as You Earn (PAYE) debt as at the end of Q1 (2016) stood at $692.86 million, up from $578.78 million as at end of Q1 (2015).
"This largely reflects incapacity to pay on some companies, some of which may no longer be operational. In the short term, this tax head will remain under pressure and performance is not expected to improve, all things remaining equal."
Corporate Income Tax head contributed $52.55 million to total revenue during the quarter with collections settling at 69.15 percent of the targeted $76.00 million and were 26.59 percent below the $71.60 million collected in Q1 (2015).
Mining Royalties closed the quarter with collections of a mere $13.39 million against a target of $24.50 million, resulting in a negative variance of 45.33 percent.
She attributed the trend to the slump in commodity prices due to the slowdown in global economies.
Carbon tax revenue was again short of target at 89.43 percent with collections of $8.11 million compared to $8.44 million over the same period in 2015.The revenue head's performance was below target due to a decrease in import volumes of petrol and diesel this year as compared to 2015.
Meanwhile, VAT on imports was $83.69 million, which is 99.52 percent of the targeted $84.10 million while withholding tax on contracts amounted to $18.05 million during Q1 (2016). This was only 89.47 percent of the target of $20.17 million.
On dividends, fees, interest and remittances, Bonyongwe reported $14.71 million was collected against a target of $16.74 million.
Revenue from other taxes such as Capital Gains Tax (CGT) and Capital Gains Withholding Tax (CGWT), Tobacco Levy and Other Indirect Taxes (Stamp Duty, Banking Levy, Presumptive Tax and ATM Levy) clocked $9.66 million, which is 69.11 percent of the targeted $13.97 million. Other indirect taxes had the highest contribution of 48.70 percent.
In light of the given challenges Bonyongwe said Zimra would soon complete the fiscalisation process it started in 2010, which involves linking old fiscal gadgets to the new and versatile Tax Management System (TMS).
"This is a smart system which collects an incredible variety of information about transactions and taxpayers.
"Already, the system has revealed some interesting insights about taxpayers, including gross understatement in the returns to ZIMRA.
The system has also revealed a lot of businesses that have hitherto been operating outside the tax net," she said
The automation process is expected to enable Zimra to meet its 2016 targets by third and fourth quarter at the latest.
Bonyongwe said the economy requires a "big push" to stimulate it sustainably through attracting foreign capital inflows.
This, she said, requires curbing all unnecessary consumption imports and concentrate on increasing productive capacity with the resources available.
The tax authority missed its target by $136.9 million with board chair Willia Bonyongwe yesterday admitting "poor performance", which she attributed to a variety of bottlenecks.
"Gross collections for Q1 (2016) amounted to $782.00 million and refunds, consisting of Value Added Tax (VAT) and Customs Duty, stood at $57.11 million. This gave rise to net collections of $724.89 million. Net collections were 84.11 percent of the targeted $861.83 million and recorded a decline of 9.75 percent when compared to Q1 2015," said Bonyongwe in a statement accompanying her report.
"The bulk of the revenue for 2016 was realised from Individual Tax (23.10 percent) followed closely by Excise Duty (22.13 percent). VAT on Local Sales contributed 18.08 percent while VAT on Imports contributed 11.55 percent. The remainder of the revenue came from the rest of the revenue heads."
She said Zimra was struggling to restrain the tax debt, which rose by 30.9 percent from $1.97 billion at the end of 2015 to $2.58 billion by the end of first quarter 2016.
"The breakdown of this debt is 0.18 percent government, 26.77 percent municipalities, parastatals and state owned entities, and 73.05 percent private entities. The debt is composed of 53.12 percent principal, 20.23 percent penalty and 26.65 percent interest," said Bonyongwe.
The Zimra board chair attributed the decline to the economic environment, which has remained harsh, even worsened by the shift in the rainy season, and the inadequate rainfall due to the El Nino phenomenon.
She said drought had adversely impacted on the whole economy because of the intricate linkages between the agricultural sector and the rest of the economy.
Further, she said, the liquidity situation worsened, depressing the operations of the few companies still functional thus leading to even lower industrial capacity utilisation.
"Companies continued to downsize and closures continued, giving rise to more job losses. Company profitability was also softened in the main," she explained.
The report indicates actual revenue collected across all revenue heads was below target, and "disappointingly" below first quarter 2015 levels, with the exception of VAT on local sales, DFIR and other taxes.
Bonyongwe also blamed non-compliance by taxpayers, corruption and lack of complete automation for failure.
"Some taxpayers don't pay their tax in full, and others do not pay their tax at all. ZIMRA will in Q2 (2016) enhance measures to improve taxpayer compliance," she said.
VAT on local sales notably increased from 14 percent in Q1 (2015) to 18 percent in Q1 (2016) and is expected to exceed 25 percent contribution with automation and greater compliance. Individual Tax and Company Tax declined by two percent whilst Excise Duty rose slightly by a percentage point to 22 percent.
VAT on Imports and Customs Duty dropped by a percentage point to 12 percent and nine percent respectively.
Bonyongwe said individual tax collections amounted to $167.43 million, which is 85.42 percent of the targeted $196 million having suffered a loss of 16.36 percent down from the $200.18 million that was collected in Q1 (2015).
"This reflects the impact of job losses and also pay cuts for those still in their jobs as companies struggle to survive. A number of companies no longer have bonus payments which are normally paid during Q1 when the annual performance is finalised," she said.
"The Pay as You Earn (PAYE) debt as at the end of Q1 (2016) stood at $692.86 million, up from $578.78 million as at end of Q1 (2015).
"This largely reflects incapacity to pay on some companies, some of which may no longer be operational. In the short term, this tax head will remain under pressure and performance is not expected to improve, all things remaining equal."
Corporate Income Tax head contributed $52.55 million to total revenue during the quarter with collections settling at 69.15 percent of the targeted $76.00 million and were 26.59 percent below the $71.60 million collected in Q1 (2015).
Mining Royalties closed the quarter with collections of a mere $13.39 million against a target of $24.50 million, resulting in a negative variance of 45.33 percent.
She attributed the trend to the slump in commodity prices due to the slowdown in global economies.
Carbon tax revenue was again short of target at 89.43 percent with collections of $8.11 million compared to $8.44 million over the same period in 2015.The revenue head's performance was below target due to a decrease in import volumes of petrol and diesel this year as compared to 2015.
Meanwhile, VAT on imports was $83.69 million, which is 99.52 percent of the targeted $84.10 million while withholding tax on contracts amounted to $18.05 million during Q1 (2016). This was only 89.47 percent of the target of $20.17 million.
On dividends, fees, interest and remittances, Bonyongwe reported $14.71 million was collected against a target of $16.74 million.
Revenue from other taxes such as Capital Gains Tax (CGT) and Capital Gains Withholding Tax (CGWT), Tobacco Levy and Other Indirect Taxes (Stamp Duty, Banking Levy, Presumptive Tax and ATM Levy) clocked $9.66 million, which is 69.11 percent of the targeted $13.97 million. Other indirect taxes had the highest contribution of 48.70 percent.
In light of the given challenges Bonyongwe said Zimra would soon complete the fiscalisation process it started in 2010, which involves linking old fiscal gadgets to the new and versatile Tax Management System (TMS).
"This is a smart system which collects an incredible variety of information about transactions and taxpayers.
"Already, the system has revealed some interesting insights about taxpayers, including gross understatement in the returns to ZIMRA.
The system has also revealed a lot of businesses that have hitherto been operating outside the tax net," she said
The automation process is expected to enable Zimra to meet its 2016 targets by third and fourth quarter at the latest.
Bonyongwe said the economy requires a "big push" to stimulate it sustainably through attracting foreign capital inflows.
This, she said, requires curbing all unnecessary consumption imports and concentrate on increasing productive capacity with the resources available.
Source - chronicle
