TAURAI MANGUDHLA
The controversial 2% tax on electronic transfers above ZWL$10, which received stiff resistance from the public at its introduction last October, is fast becoming the savior of government revenue. Officially called the Intermediated Money Transfer Tax (IMTT), this much-despised tax (at least initially) is swelling the coffers of the government with much-needed revenue for national development.
According to figures just released by the Zimbabwe Revenue Authority (ZIMRA), IMTT and an increase in excise duty paid off for the government as revenue collection grew by 41% in the first quarter of 2019.
ZIMRA’s revenue performance report for the first quarter ended March 31 shows that revenue surpassed the set target in both gross and net terms, and IMTT played a sterling role, putting a whopping ZWL$282.84m into government coffers, against a target of ZWL$150m.
In percentage terms, IMTT grew by 5333.99%, from ZWL$5.21m collected before the change in policy in the first quarter of 2018.
ZIMRA said: “The spike indicates the structural break due to policy change and also is a true indicator of the positive impact that IMTT is having on total revenue collections.”
Over all, “during the quarter, gross collections amounted to ZWL$2.059bn, which was 41.50% over the set target of ZWL$1.455bn. After deducting refunds of ZWL$114.98m, net collections were ZWL$1.944bn,” ZIMRA said.
“This translates to a positive variance of 33.62% above the target of ZWL$1,455bn. Compared to the same period in 2018, gross collections grew by 85.13% from ZWL$1,112bn collected in the first quarter of 2018, which is above the annual inflation levels.
IMTT and a sharp rise in fuel costs piled pressure on a citizenry already choked by rising inflation. IMTT was introduced in October last year and places a 2% tax on electronic transactions above ZWL$10 and a cap of ZWL$10,000 on transactions above ZWL$500,000. The tax met strong resistance from the public as it is an extra cost on transactions by citizens and corporates.
Matters worsened when in January 2019, President Emmerson Mnangagwa raised petrol prices to ZWL$3.31 per litre and diesel at ZWL$3.11 per litre, from ZWL$1.38 and ZWL$1.44 per litre respectively.
This sparked major protests countrywide which claimed lives. The price increase saw duty on diesel going up to ZWL$2.11 per litre from ZWL$0.461 per litre, while blended petrol was put at ZWL$2.482 per litre, from ZWL$0.622 per litre, signifying a 299% increase in duty.
Economist John Robertson says the two revenue heads – IMTT and excise duty, earning the government a total of $848.9m – are effectively eroding consumers purchasing power and lowering their standards of living, especially when inflation is rising.
“That means less money will be spent in the shops,” says Robertson. “If you look, VAT is supposed to start dropping because when you spend an extra ZWL$100 each time you fill your tank on taxes, and another 2 percent tax every time you transact, you end up with less money to actually spend. Profits of large corporates in hard currency terms are expected to drop going forward.”
According to the ZIMRA revenue performance report, net collections during the first quarter of 2019 recorded a growth of 83.82%, from ZWL$1,057bn that was realised in the same period in 2018.
The positive performance is attributed to the significant contributions from IMTT, corporate income tax and excise duty.
Excise duty collections, Zimra said, amounted to ZWL$565.65m against a target of ZWL$242.19m. This translates to a positive variance of 133.56%. Excise duty collections increased by 142.44% from ZWL$233.32m realised in the first quarter of 2018,” ZIMRA said.
Excise duty contributed 27.47% to total net collections during the first quarter of 2019.
“The performance of the revenue head is attributed to an increase in the duty rate and demand and supply of diesel and petrol. During the quarter under review, diesel imports increased by 9.1% from 208.86 million litres supplied in the first quarter of 2018 to 227.86 million litres,” ZIMRA said.
“Similarly,petrol imports increased by 11.19% from 123.67 million litres in the first half of 2018 to 137.51 million litres.”
to a positive variance of 40.74%. Collections grew by 88.31% from ZWL$128.55m that was collected in the same period in 2018.
Major factors to the positive performance of the tax head include improved profitability by some established companies, improved compliance, and enforcement activities by ZIMRA
Corporate income tax collections were ZWL$242.08m above the target of ZWL$172m translating to a positive variance of 40.74%. Collections grew by 88.31% from ZWL$128.55m that was collected in the same period in 2018.
Major factors to the positive performance of the tax head include improved profitability by some established companies, improved compliance, and enforcement activities by ZIMRA.
