eBusiness Weekly
Business Writer
Zimbabwe is heavily reliant on excise duty charged on fuel for its revenue, a treasury report for the 11 month to November 30, 2019 released last Friday reveals.
Although the commodity has been in short supply for the better part of last year, and even now, excise duty of fuel was the biggest contributor to the country’s gross collections of $17,7 billion.
According the Consolidated Statement of Financial Performance of the Consolidated Revenue Fund for the 11 months to November 30, 2019, the biggest revenue contribution of $2,95 billion or 16,6 percent was from excise duty on fuel.
In total excise duties, which includes beer, tobacco, air-time among others contributed $3,4 billion.
Zimbabwe duty on fuel is approximately 24 percent per litre if retailed in the local currency and between 40 and 45 percent per litre if retailed in foreign currency. For the 11 months under review, diesel imports amounted to US$797 million while petrol imports amounted US$344 million.
While excise duties are by far the leading source of revenue for most countries they are levied on commodities produced within the country.
Apart from fuel, the country is also surviving on revenue generated from charging import duty on goods and services. VAT from imports amounted to $2,4 billion while gross customs duty amounted to $1,6 billion.
Market watchers say increased imports to cover for local shortages have boosted collections of both VAT on Imports and Customs Duty.
The statistics also showed the economy is surviving on what people are consuming. After excise duty on fuel, the second largest contributor to revenue generation was VAT on domestic goods although much of it was driven by inflation as prices sky-rocketed.
VAT on domestic goods amounted to $2,9 billion while the intermediated money transfer tax popularly known as the 2 percent tax weighed in with $2,1 billion.
Individual and company tax contributed $2,5 billion and $1,7 billion respectively.
Meanwhile, total expenditure for the period shot to $18,3 billion against a budget of $15 billion with the actual deficit for the period amounting to $600 million after revenue collection was $5,4 billion more than budgeted.
Government’s wage bill was the biggest late down to efforts to cut down on spending under the austerity measures introduced by Finance and Economic Development Minister Mthuli Ncube in his 2019 National Budget in support of the Transitional Stabilisation Programme.
Amid efforts to give its employees a living and inflation adjusted wage, Government ended up spending $800 million more on the civil service wage bill.
Foreign travel was the other area where there was a budget overrun probably because of exchange rate movements, which meant there was need to pay more for foreign currency used for air tickets and per diems. A total $431 million was spend instead of the budgeted $150 million.
Capital transfers to the ministry of transport, GMB and local authorities also got more than budgeted for by $2 billion over the budgeted $3 billion.
Some of the budget overrun could have, however, forced Government to spend less than budgeted on acquisition and construction of buildings.
Market watchers are of the opinion that higher taxes are probably contributing more to lower disposable incomes than galloping inflation which reached 521 percent in December 2019.
The net revenue collected in Quarter 4 of 2019 grew by 651,29 percent in nominal terms as compared to the same period in 2018. Although part of the growth can be attributed to inflationary pressures and ZIMRA’s revenue collection and enforcement strategies, a significant portion can also be attributed to high taxes.
