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ZIMRA Surpassing Revenue Collection Targets: Understanding the Dynamics


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The tax collector reported a 118.71% increase in revenue collections during the first half of 2019. During the first six months, the Zimbabwe Revenue Authority (ZIMRA) collected ZWL$5.27 billion against a target of ZWL$4.3 billion thereby surpassing the 2018 first half collections of US$ 2.4 billion. This is largely attributed to the Intermediated Money Transfer Tax of 2% which grew by 7717%, Pay As You Earn (59.4%), Corporate Income Tax (62.2%), and Value Added Tax on Imports and Exports (140.9%). 

However, there are a lot of distortions associated with the introduction of an exchange rate between the USD and the RTGS dollar in February 2019 and the monetary policy transition from multiple currency regime to the use of the Zimbabwe dollar as a local currency introduced under SI 142 of 2019. It is therefore unrealistic that ZIMRA is comparing revenue targets set in USD against actual collections in Zimbabwe dollars without considering the exchange rate factor.  It would only have made economic sense for the revenue authority to standardise the base currency for comparable purposes. Based on an average exchange rate of US$1: ZWL$5 (as at 30 April, 31 May and 30 June 2019), the ZWL$5.27 billion is equivalent to US$1.1 billion against a target of US$4.3 billion, in which case, the tax collector instead missed the revenue target by 74%.

Furthermore, the Ministry of Finance and Economic Development deliberately maintained the US$ based tax tables after the floating of the exchange rate such that people’s disposable incomes were eroded excessively. Based on the current Reserve Bank of Zimbabwe mid-rate exchange rate of US$1: ZWL$9.2, the minimum tax threshold has been reduced from US$350 to US$38. This implies that a person who earns an equivalent of US$39 is now being taxed in Zimbabwe. It is unfortunate that ZIMRA is attributing the increase in Pay As You Earn collections to measures being implemented to levy PAYE in foreign currency. This practice entails converting individual foreign currency earnings to local currency for tax purposes after which the remittances are made in foreign currency. This is basically an unfair tax practice resulting in people shifting from one tax bracket to the other without an increase in wages and salaries. As the exchange rate between the US$ and the ZWL$ continue rising, people’s disposable incomes continue dwindling, making it impossible to plan on their salaries.

In terms of the missed target on Value Added Tax on local sales, it is critical to take into cognisance that as a net importer, imports of basic commodities continue flooding the market. Whilst this has had a positive impact on Customs Duty and VAT on Imports, the balance of trade in Zimbabwe is unhealthy. On the other hand, Value Added Tax on local sales performed below target as the prices of basic commodities continue skyrocketing against eroded disposable incomes. This has negatively affected people’s consumption patterns and ultimately Value Added Tax on local sales. 

Having noted the above, ZIMCODD recommends the following:

  • ZIMRA, in consultation with the Ministry of Finance and Economic Development must harmonise the revenue targets and the actual figures in line with exchange rates on foreign exchange market in order to address the current macroeconomic distortions. Furthermore, the tax agency must standardise the base currency for comparison purposes.


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Blog Release Date: 
Monday, August 5, 2019 - 12:30
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