The Treasury lost approximately $1.6 trillion last year, which is a 312% increase compared to the prior year, due to tax expenditures consisting of uncollected tax resulting from exemptions and incentives to corporates.
According to Zimbabwe Revenue Authority’s (Zimra) annual report for 2022, the potential revenue lost in 2022 was from exempt supplies, zero-rated supplies, rebates, suspensions, and trade agreements. The government has been offering tax incentives to foreign companies to attract investment, a move described by civil society organisations as harmful and unfair. For instance, the government exempted Chinese telecommunications giant Huawei Technologies from paying income tax dating back 11 years to December 2009. Great Dyke Investments, which is developing a platinum mining project in Darwendale, Mashonaland West Province, was granted a five-year tax exemption by the government.
The report notes that in 2022, annual net revenue collected increased in nominal terms from $463.57 billion collected in 2021 to $1.992 trillion in 2022. However, corporate income tax collections were 5.09% below target and contributed 15% to total revenue down from 20.42% in 2021. Read the report:
The revenue head failed to meet its target despite the authority intensifying various revenue enhancing activities such as sector-based audits and door-to-door visits to harness revenue from various sectors.
The report noted that despite the authority intensifying various revenue-enhancing activities such as sector-based audits, collections from the corporate income tax failed to meet its target. It also indicates that:
a). Value Added Tax (VAT) exceeded the target by 28.37%, contributing 25% to annual revenue,
b). Customs duty contributed 8% to total revenue, an increase from 7% in 2021.
c). Excise duty exceeded the target by 39.34%, with fuel imports contributing 72.48% of the revenue under the tax head.
d). Mining royalties surpassed the target by 1.15%, accounting for 3% of total revenue.
e). The intermediated money transfer tax (IMTT) surpassed the target by 25.64%, with collections down from 9.64% in 2021.
f). Other taxes contributed 6% to total revenue, surpassing the target by 10.49%.
Zimbabwe requires all available funds to construct critical infrastructure such as roads, dams, schools, hospitals, and water and sewage reticulation systems. Such projects would significantly enhance the delivery of essential social services to the populace. The country has been grappling with a shortage of funds for infrastructure development, which has resulted in poor service delivery and a dilapidated infrastructure network.
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