Border closures hit Zimra revenue collections

THE Covid-19 induced closure of borders had a knock-on effect on customs duty and value added tax (VAT) on imports resulting in their reduced contribution to overall collections and performances against set targets.

Figures from the Zimbabwe Revenue Authority (Zimra) for the second quarter of 2020 show that customs duty and VAT on imports contributed 6 percent and 8 percent to total collections during the quarter.

Net customs duty amounted to $1,139 billion against a set target of $1,171 billion resulting in a negative variance of $32 million or 2,6 percent.

However, on a year-on-year basis, the revenue head registered a growth of 424 percent from $217 million recorded during the same quarter last year.

During the review period, VAT on imports managed to surpass targets by 5 percent to record $1,599 billion.

Zimra vice chairman Josephine Matambo (pictured right), however, said the revenue head could have performed better than the recorded figures but closure of some borders in the fight to limit the spread of Covid-19 affected performance.

“The ban on non-essential imports and closure of some border posts at the start of the Covid-19 lockdown had a major negative impact on customs duties and VAT on imports reducing their contribution to the overall collections and performance against targets.

“The performance of the revenue heads would otherwise have been better with the continued depreciation of the local purchasing unit against major currencies since import duties and VAT on imports are calculated using the prevailing exchange rate,” she said.

Meanwhile, total net revenue collection for the quarter surged 542 percent to $20,11 billion from the $3,13 billion recorded during the same quarter in the prior year.

This was 42 percent above the target of $14,09 billion set by Treasury.

While the authority exercised strategies to improve revenue collection, the growth was a result of the hyperinflationary environment obtaining in the country which resulted in prices of goods and services going up.

“All revenue heads performed above 2019 levels in nominal terms because of the hyperinflationary environment that the country is experiencing,” said Matambo.

During the quarter under review, companies, individuals, excise duty and value added tax (VAT) on local sales were the major contributors to revenue collected accounting for 21 percent, 17 percent, 15 percent and 10 percent in that order.

In the outlook, Zimra expects revenue collection to remain stable at current levels as the exchange rate on the official market holds under the auction system.

Zimbabwe has been experiencing foreign currency shortages resulting in the exchange rate galloping on the illegal parallel market.

However, the exchange rate seems to have stabilised after Government introduced the auction system which enhances availability of foreign currency, address exchange rate distortions as well as enhance transparency in the system.