SHORT VIEW by BATANAI MATSIKA
Following the review of the intermediary money transfer tax by the Ministry of Finance & Economic Development from US5c to 2,0% on every transaction above USD10, some activists are taking the issue to the courts. For example, the Combined Harare Resident’s Association (CHRA) has filed a normal court application for a constitutional declaratory order to stop banks from charging the 2,0% tax. Overall, the government has embarked on a drive of enhancing its revenue streams. President Mnangagwa has supported the move and indicated that the money transfer tax will remain in force citing that it will assist the government to fund the manufacturing sector and modernise the economy which will, in turn, create more jobs in the broader economy.
Intermediary Money Transfer Tax to Remain in Force
Meanwhile, the Zimbabwe Revenue Authority (ZIMRA) recently released its Q3 2018 Revenue Report showing a positive trajectory in terms of revenue collections. Revenue collections were ahead of Q3 2017, which is an indication of an improving operating environment for business and improved revenue collection measures. However, high debt continued to negatively affect optimum revenue collection. Debt which recorded USD4,54bn as at the end of Q2 2018, increased to USD4,55bn at the end of Q3 2018. Overall, gross collections amounted to USD1,28bn against a target of USD1,089bn. After deducting refunds of USD95,94m, net collections amounted to USD1,19bn, which was 8,84% above the target.
•Major revenue contributors were Excise Duty, Net VAT on Local Sales and Individuals as illustrated below;
•Individual Tax, Company Tax, VAT on Imports, Customs Duty, Carbon Tax, Mining Royalties and Withholding Tax on Contracts surpassed set targets for the quarter;
•Performance of VAT on Local Sales was compromised by high VAT Refunds which amounted to USD94,67m, an increase of 53,39% from Q3 2017;
•Overall, Q3 2018 has shown an improvement in all revenue heads in comparison to Q3 2017 on the back of (i) intensive implementation of revenue enhancement measures and (ii) reduced revenue leakages.
All in all, the global revenue performance remains buoyant and there is optimism to surpass the annual target. However, while a number of revenue enhancement measures have been put in place, it is worth highlighting that the tax-base in Zimbabwe still remains very lean owing to limited foreign direct investments and high levels of unemployment in the general economy. An analysis of public finance numbers signifies that Zimbabwe continues to experience significant fiscal imbalances (budget deficit of USD1,7bn in 2017), representing 9,4% of GDP. While the review of the money transfer tax from USS5c per transaction to US2c per dollar transacted is expected to boost revenues, expenditures are expected to remain high and we are forecasting the 2018 budget deficit as a % of GDP to be double-digit. That said, it is clear that the long arm of the tax collector has been extended with the 2,0% tax. However, the biggest question in the minds of Zimbabweans is whether or not a similar arm will tamper with the new FCA Nostro.
Batanai Matsika Head of Research – Akribos Research Services
+263 78 358 4745
batanai@akriboscapital.com
