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Gershem Pasi

Oliver Kazunga Senior Business Reporter
LOW capacity utilisation in industry and limited disposable income weighed down on the contribution of Value Added Tax (VAT) from local sales to revenue collection by the Zimbabwe Revenue Authority (Zimra) in the first half of the year.In a revenue performance report for the first six months which Zimra commissioner general Gershem Pasi said reflected the obtaining underlying economic environment, VAT on local sales was 33 percent below target at $231,9 million against $346 million.

Net revenue collections for the first half of 2014 amounted to $1,72 billion against a target of $1,74 billion resulting in a negative variance of one percent.

“A total of $231,9 million was collected against a target of $346 million after deducting refunds of $85,6 million resulting in a negative variance of 33 percent,” said Pasi.

“Net VAT on local sales contributed to total VAT revenue and 13 percent to total revenue. The underperformance of the revenue head can be attributed to the fall in industrial capacity utilisation which has resulted in reduced production of goods that attract VAT.

“A decline in disposable incomes as some companies are retrenching, closing or failing to award meaningful remuneration increments to their employees.”

The performance of the VAT revenue head is expected to remain depressed until industrial capacity utilisation improves.

Pasi said customs duty during the period under review was also off the mark by 29 percent at $137 million against a target of $194,5 million.

“Customs duty refunds amounting to $10,6 million were paid out during the first half of 2014. The majority of the funds totalling $7 million emanated from exchange rate variations,” he said.

“The underperformance of the revenue head is attributed to the following: liquidity constraints and insufficient domestic and foreign lines of credit – this has led to a reduction in the volume of duty —paying imports. Revenue forgone during the first half of the year as a result of various instruments which suspended the payment of customs duty amounted to $296,3 million.”

VAT on imports, Pasi said, showed a positive variance of six percent to $224,7 million against a target of $212 million.

This was attributed to the reduction in local industrial capacity utilisation that had compelled economic agents to substitute  local goods with imports that attract VAT.

“The anticipated performance of the revenue head is not expected to improve significantly as liquidity challenges will constrain the importation of goods that attract VAT.”

Pasi said an improvement in the economic outlook as envisaged under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation would aid revenue collection.