11 April 2014

Zimbabwe: Revenue Crisis - Govt in 'Obfuscatory Guesswork'

THE dire warning from the Zimbabwe Revenue Authority (Zimra) that the country faces tougher times ahead with the cash-squeeze worsening due to depleted revenue inflows into state coffers only serves to further expose government's illusion the economy is set for an indigenisation-inspired rebound.

Zimra reportedly collected US$248 million in February, but government spent US$265 million, leaving a US$17 million budget deficit.

A frank Zimra commissioner-general Gershem Pasi told parliament this week: "We are headed for serious shrinkage of revenue unless something is done soon to increase revenue in the country. It's a miracle that we have surpassed our first quarter target ... considering the current state of the economy. Things are not well out there!"

That is hardly news. Indeed, the economy is deteriorating, as it has been for a decade before 2009, but what are authorities doing about it?

Ordinarily, Zimra, deriving its mandate from the Revenue Authority Act and subsidiary legislation, is tasked with assessing, collecting and accounting for revenue on behalf of the state through the Minister of Finance.

But the frantic manner in which it has been going about its business recently amid a blaze of publicity, coupled with government's delays in paying salaries and effecting an agreed-to wage increment, exposes government's desperation for funds and smoke-and-mirrors tactics.

Whatever the case, media reports have been focusing on Zimra's vigorous attempts to collect as much revenue as it can. This includes plugging revenue leakages, targeting the non-tax paying informal sector and garnishing defaulters including "bank accounts of state-linked enterprises whose top management are manipulating records and using political influence to avoid paying taxes". So dire is the revenue situation that Zimra is also mulling tax on offshore accounts, among other measures to increase revenue collections.

According to reports, Pasi is under immense pressure from his Finance ministry bosses who are breathing hard down his neck through daily calls to check what has trickled into Zimra's meagre coffers. Concomitantly, Zimra is also raiding companies to ensure tax compliance and handing out stiff penalties to defaulters. But the blitz and penalties for defaulting firms are seen as sounding the death knell for companies reeling under financial pressures, including wages, pension contributions and late or non-payment by debtors.

This has all the hallmarks of a vicious cycle. As we reported last week massive retrenchments loom as indicated by applications recently made to the Retrenchment Board, with more than 1 500 workers set to find themselves on the streets if applications before the board are approved. Coupled with continued company closures, this means the tax base will further shrink.

As usual, government has a scapegoat. There were claims last week at least US$7,4 billion was circulating in Zimbabwe's informal sector and government has taken a deliberate move to formalise operations in the sector, something analysts described as an "obfuscatory guesswork".

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