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Business Reporter
THERE is urgent need for Government to look at investments that bring capital and create employment in the economy after a lacklustre revenue performance in the period to December 2013. With external budget support a virtual non-starter, finding alternative revenue lines will be painstaking for an economy that has caught a feverish cold.

The Zimbabwe Revenue Authority missed its target for 2013 by 6 percent due to a shrinking national tax base caused by a slowdown in economic activity in what will present budget deficit poser for Treasury.

Zimra chairman Mr Sternford Moyo said the tight liquidity, company closures, scaling down of operations and low industrial activity resulted in shrinking tax base, which consequently affected total revenue collections.

Total collections came in at US$3,43 billion against a target of US$3,64 billion tax on domestic dividends and interest. Mining royalties were  the worst performing revenue heads at 70 and 45 percent negative variances, respectively.

The missed target will further strain Government’s stretched Treasury purse and enlarge the budget deficit projected at US$100 million.
Ordinarily, Government spends on the strength of projected revenues and collect later to meet obligations from its expenditure. As such, actual collections at US$3,43 billion against projected US$3,7 billion presents major headaches.

“Government will need to religiously implement what was put in Zim-Asset (Zimbabwe Agenda for Sustainable Socio-Economic Transformation) to reinvigorate revenue,” said a Harare-based economic analyst with a global bank.

Apart from vigorous pursuit of maximising revenue inflows from existing internal sources, there is need to attract as much new investment as is possible.

“As we are all aware, Government is not getting any external budget support, Government needs to fully implement Zim-Asset, be tighter on revenue collection and ensure that it closes down revenue leakage loop holes.”

Zimbabwe’s scenario is complicated by the fact that Government uses a basket of foreign currencies, as such, it cannot print to fund deficits, neither is there latitude to raise funding from the open market or borrow from multilateral institutions in the face of the US$6,1 billion debt to these creditors.

Nonetheless, the fact remains Government has to find ways to bridge the gap on projected expenditure, some of which might                   have been unavoidable, or else certain programmes have to be shelved if there is no funding.

Economists believe the trick to resolving deficits, inevitably, lies in economic growth. Higher growth reassures investors, increases tax revenues and reduces spending on unemployment benefits or and other welfare payments.

In that regard, the Government needs to pursue policies that reduce the long-term growth rate, such as protectionism or higher taxes, and focus instead on measures that boost the growth potential of the economy, such as more flexible labour markets and other productivity-enhancing reforms.

The bulk of the tax revenue collections this year were realised from pay-as-you-earn (22 percent), value added tax on local sales (16 percent), excise duty (15 percent) and corporate tax (12 percent). VAT in general contributed 14 percent.

PAYE collections totalled US$740,3 million against a target of US$685 million, reflecting an 8 percent positive variance helped by bonuses and performance awards, salary increments, better tax compliance and lay-offs.

Company tax revenue totalled US$401,1 million against a target of US$457,4 million resulting in a negative variance of 12 percent with the poor performance tax head attributed to low industrial capacity and slowing economy.

The tax head is anticipated to further slowdown in light of the drop in industrial capacity, from 44,6 percent to 39,6 percent in 2013, (Confederation of Zimbabwe Industries 2013 report) and the general slump in economic activity in 2013.

Revenue collections from mining royalties amounted to US$133,7 million against a target of US$245 million resulting in a 45 percent negative variance.