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Patrick Chinamasa

Government expects to reduce the revenue shortfall currently obtaining by about one third by raising selected tax rates and extending VAT to parts of the insurance sector.

In a letter of intent to the International Monetary Fund dated September 30, 2015, Finance and Economic Development Minister Patrick Chinamasa admitted the shortfall in revenue collection had intensified fiscal pressures thereby making expenditure rationalisation an urgent priority.

He said that Government was committed to improving the fiscal position by strengthening revenue collection and rationalising expenditures including savings on employment costs.

“The objective is to improve our capacity to service debt, deliver better services and increase funding for critical social and infrastructure projects.”
Government, Minister Chinamasa said, was fully committed to achieving a balanced primary fiscal position in spite of the revenue shortfall.

“We intend to lower the primary deficit to below 0,5 percent of GDP and aim at a balance in 2016.

The shortfall reflects the country’s widespread economic difficulties, shrinking corporate profits and earnings, limited ability of companies to pay taxes on time, and an increasingly informal economic activity.”

In the Mid-Year Fiscal Policy Review, Government announced measures to generate revenues by removing exemptions, raising tax rates, and extending the VAT to parts of the insurance sector.

In order to meet the target of reducing the revenue shortfall by a third, Minister Chinamasa said Government was enforcing tax payments by agreeing with clients on repayment schedules to eliminate overdue tax obligations.

“We are strengthening revenue administration, in collaboration with our international partners.

Moreover, we plan to implement the recommendations of the recently completed AFRITAC South technical assistance mission focusing on improving risk mitigation techniques in customs.

Going forward, we plan to rationalise the tax expenditure regime.

We also plan to review the design of our tax system with a view to making it more business friendly and to halt the recent slide in tax collection as a percentage of GDP.”

He said Government had made efforts to reduce its employment costs by tightening controls and starting to rationalise the civil service.

“We will keep the 2015 employment costs below budget projections. Cabinet is currently considering the report by the Civil Service Commission (CSC), containing proposals to streamline public sector employment.

In line with the recently completed audit of the civil service, we have started to eliminate duplications and redundancies.”