New funding model for Zimra

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Permanent secretary in the Ministry of Finance and Economic Development George Guvamatanga

Kudzanai Sharara
Government is considering allowing the Zimbabwe Revenue Authority to retain a certain percentage of its revenue collections to cater for operational obligations, Secretary to the Ministry of Finance and Economic Development George Guvamatanga said last week.

While making remarks at Zimra’s 2019-2023 Strategic Planning Stakeholder Consultative Workshop, Guvamatanga said his ministry would: “Want to work on a process, which says for your operations and your capex, I will give you this percentage of your revenue collected.”

In 2017, Zimra’s gross annual collections amounted to $3,978 billion. Net collections after deducting refunds of $228,28 million amounted to $3,750 billion against a target of $3,400 billion.

If Government is to go ahead with the new plans, the move will act as an incentive to the revenue collector, and might also curb corrupt tendencies as officials would be adequately catered for. So if you want more money, collect more money, he told Zimra’s top executives including Commissioner General Faith Mazani.

“So it becomes standing to say look, PS (Permanent Secretary), this is what we have collected, this is the percentage that you promised, so that’s where I want to get with the CG (Zimra’s Commissioner General) to say look I will commit to give you this percentage of whatever revenue you collect. I will account for it, but I will give it to you, so if you guys want your living conditions to improve, if you want your salaries to improve, just raise more money,” said Guvamatanga.

He said the provision of resources to Zimra is important as it will help the tax authority become efficient and effective.

“We do understand that if you are expecting effective and efficient operations, there should be adequate resources, people cannot be in Beitbridge without air condition, or people cannot be crammed in single rooms and single beds,” he said.

Guvamatanga said he will visit all the facilities to get on the ground understanding of requirements before finalising both the National and Zimra’s budget for 2019.

Some analysts view the move as progressive.

“Having a standing allocation that is agreed upfront between the tax collector, Zimra and the Ministry of Finance is a very progressive development as it reduces unnecessary back and forth negotiating for funding,” said Walter Mandeya an analyst with Trigrams Investment.

“This also encourages transparency as Zimra and its employees remain incentivised to increase tax collections. We would like to see the same thinking applied to key social ministries and departments ensuring that these basic service areas have guaranteed funding.

“With the budget set for presentation in November, we will be looking forward to seeing greater standardisation of allocations along the lines being proposed by Permanent Secretary Guvamatanga,” he said.

Meanwhile, Mazani said the issue of the debt that Zimra is owed by tax payers, is really a big problem that the tax authority is struggling to dealing with.

High debt continues to negatively affect Zimra’s optimum revenue collection, as obligations increased to $4,55 billion during the third quarter ended September 30, 2018. In 2017 alone, total debt increased by 47,57 percent.

Mazani said there are situations where “the salaries have been paid that include the pay as you earn (PAYE) but the PAYE is not remitted, the VAT is collected but is put in somebody’s cash flow.”

“Yes on the companies I know it then becomes an issue, these are parastatal companies that’s another discussion, but you will find out, the biggest challenge is where those companies are owed by parastatal, or municipalities, which are given money but are not managing to pay. There is an element of mismanagement, so let’s have that commitment because Government should be able to give you money, but it is depending on that money coming back,” said Mazani.

“If it means we are going to attach assets of parastatals, we are going to have to do it,” she said.

Guvamatanga, in response said some of the debt that is on the books of Zimra, constituting approximately 14 percent, is inter-Government debt and Government would want to clean up some of the outstanding debt and might also consider setting off some of it.

“I think I have taken a very closer look at the debt profile (debts owed to Zimra) and there are 14 percent of that debt is inter-Government debt, and we want to clean up most of the outstanding issues on debt. Debt between industry and Government, debt between inter-Governmental institutions.

“I think where there is an opportunity for set-offs, we will consider it, because most of the debt has been outstanding for a very long time,” he said.

Guvamatanga said in normal business environments, the long outstanding debts would have been written off.

“But the underlying message is that where there is an opportunity for set-offs, we will consider those opportunities,” he said.

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