National revenue for the third quarter ending September 30, 2020, is expected to stabilise at current levels as the exchange rate on the official market holds under the auction system, the Zimbabwe Revenue Authority (ZIMRA) has said.
Zimbabwe has been experiencing foreign currency shortages, resulting in the exchange rate galloping on the illegal parallel market.
However, the Government, through the central bank, introduced the auction system, which has enhanced the availability of foreign currency, address exchange rate distortions as well as enhanced transparency in the system.
ZIMRA’s expectations also come at a time business performance is expected to remain subdued as a result of the effects of the Covid-19 pandemic, which will also affect collections at the tax authority.
“Covid-19 continues to pose challenges for the local and global economies and the authority has not been spared. Recovery from the Covid-19 shock is expected to be more gradual than expected as the country continues on Level 2 lockdown.
“Going forward into the third quarter of 2020, although lockdown measures were relaxed allowing businesses to operate, business activity is anticipated to remain subdued due to reduced business hours and the risk of rising local infections.
“Revenue collections are expected to stabilise at the current trend as the exchange rate stabilises due to the foreign exchange auction system introduced at the end of June,” said ZIMRA vice-chairperson Ms Josephine Matambo in a second-quarter performance update.
During the second quarter, net revenue collections amounted to $20 billion surpassing the target by 42 percent.
However, some revenue heads such as Value Added Tax (VAT) on imports and customs duty were affected by the closure of borders in line with movement restrictions to limit the spread of the Covid-19 pandemic.
This resulted in their subdued contribution to the overall revenue collected during the quarter.
Figures 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.
Despite the effects of Covid-19 on businesses, ZIMRA is forging ahead with its five-year strategy (2019-2023), which was aligned with the Transitional Stabilisation Programme (TSP).
The strategy is supported by three pillars, that is the restoration of fiscal balance, plugging of revenue leakages, and ease of doing business.
These should also help in the country’s quest to become an upper-middle-income economy by 2030.