The surge in tax revenue happened despite a slowdown in operations due to a pandemic which brought the whole world to a standstill at the beginning of Q2 2020. Zimbabwe enforced a total shutdown of the economy, including closing its borders in April 2020 as way to curb the spread of the novel coronavirus.
Resultantly ZIMRA saw the effect as April collections missed the target due to minimal trade and operation. However net revenue collections grew fivefold in nominal terms from ZWL$3.13 billion in the same quarter last year.
Despite all tax heads registering growth in nominal terms, it is in real terms that is concerning. With inflation hovering around 780% in the quarter only two tax heads seem to have gained from last year collections which, reflects the true impact of Covid-19 and reduced spending of individuals and companies.
Major contributions of the revenue collected came from companies at 21 percent followed by individuals at 17 percent, excise duties at 15 percent while Intermediated Money Transfer Tax (IMTT) accounted for 11 percent. Other revenue heads such as Net Customs Duty, other taxes as well as Tobacco Levy and other indirect taxes performed below expectations.
Company Tax grew by 1 139.47% year on year while royalties grew by 967.62% due to an increase in nominal profits growth of over 1 000% and a deteriorating currency against major currencies respectively.
Net value added tax on local sales missed the target due to refunds on companies, but the regulator noted that the gross collections were above target.
Customs duty came in below target by 2.75% due to a slowdown on trade as flights and borders have been reduced to essential movement only.
The Intermediated Money Transfer Tax (IMTT) was boosted by inflation as inflation increased in the first two months of the quarter, with more goods crossing over the $100 minimum threshold set by treasury. Enhanced recovery methods by the regulator has seen the tax exceed target by 20.72% in the period under review.
The country needs to stimulate spending in the economy in order to see actual growth in the tax revenue over the second half of 2020. Despite the pandemic that continues to disrupt business, Zimra will continue collecting revenues that are more than set targets due to high inflation However if the recently inducted foreign currency auction continues to arrest the parallel market rate, there will be a slowdown in the rate at which actual collections surpass targets quarter on quarter.
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