Zimbabwe Revenue Authority (Zimra) exceeded its revenue collection target for second quarter 2020 by an incredible 42.75 percent thanks to rising inflation that catapulted profits of local businesses and increased wages, latest figures show.
Analysts have warned that surpassing revenue targets should not be construed for economic growth in an economy that has seen year on year inflation surpass 730 percent in May 2020.
The tax collector netted ZWL 20.112 billion in revenue against a target for the quarter of ZWL 14.089 billion.
Inflation has been on a rampage, crawling towards the 1000 percent market in recent weeks, and this saw incomes adjusted upwards as companies sought to hedge employee earnings from depreciation in value.
Corporate tax dominated the tax heads, contributing 21 percent of total collections followed by individual taxes that racked 17 percent of total collection.
“The revenue head registered a positive performance, mainly bouyed by cost of living adjustment, interbank market adjusted salaries and cushioning allowances paid by most companies to cushion their employees against hyperinflation scourge,” Zimra said.
Excise duty contributed 15 percent of total revenue, followed by VAT on local sales (10 percent), Intermediated Money Transfer Tax (11 percent), VAT on imports (8 percent), Customs duty (6 percent), Non tax revenue (5 percent), Mining royalties (4 percent) and other taxes.
However, the authority anticipates a much stable revenue flow in third quarter following the stabilization of the exchange rate since the introduction of the foreign currency auction system which is likely to slow down inflation.
“Revenue collections are expected to stabilise at current trend as the exchange rate stabilize due to the foreign currency exchange auction system introduced at the end of June 2020,” said Zimra.
Zimbabwe’s economy is at entangled in a host of adversities including the Covid-19, inflation, weak production, low confidence levels to attract both local and foreign capital among others, and the International Monetary Fund (IMF) has already projected it will shrink by a minimum of 10 percent in 2020.