GOVERNMENT, facing a worsening liquidity squeeze, will review fiscal legislation and policies to align them to the new Constitution as it moves away from cash budgeting, where every cent spent was matched with every cent collected to avoid a budget overrun.Finance Minister Patrick Chinamasa wants fiscal legislation and policies to be aligned to the new Constitution to increase tax revenues.
But this can only be achieved if capacity utilisation in industry improves and all major sectors of the economy are revitalised.
The Confederation of Zimbabwe Industries, the country’s largest industrial lobby group, says that companies are operating at 39,6 percent capacity while all major sectors of the economy are depressed due to capital constraints.
As a result, government marginally missed revenue targets for the first six months of the year due to massive company closures, triggered by the underperformance of the economy.
Gross collections for the second quarter, according to the Zimbabwe Revenue Authority, stood at US$873,6 million, while net collections were US$836,9 million, against a target of US$886,2 million.
Net collections for the first six months of the year stood at US$1,66 billion against a target of US$1,67 billion.
Value Added Tax contributed the bulk of the revenue at 31 percent of total collections during the period under review, followed by income tax on individuals (21 percent) and excise duty at 14 percent.
Company tax collections had a 10 percent variance on the US$205,8 million targets due to subdued performance of the local manufacturing sector.
While prioritising the revitalisation of all sectors of the economy to boost production and revive industries that have ceased operations, Chinamasa said Zimbabwe’s main struggle continues on the path of socio-economic transformation and economic recovery.
“We therefore need to cultivate a culture of complying with revenue laws and to exhort each other to pay taxes on time and in full,” he said.
A report jointly authored by the African Development Bank and Washington-based think tank Global Financial Integrity says Zimbabwe lost a cumulative US$12 billion in the last three decades through illegal financial outflows ranging from secret financial deals, tax avoidance and illegal commercial activities.
The hemorrhage is part of an estimated US$1,4 trillion that was lost by the African continent in the three decades from 1980 to 2009.
Significant losses in the region were, however, recorded in neighbouring countries such as South Africa, Botswana and Mozambique where outflows were measured at US$184 billion, US$31 billion and US$25 billion respectively.
It is believed that between US$30 billion and US$40 billion is being siphoned out of Africa each year.
There has been concern that Zimbabwe might lose substantial investments if it ditches the current multi-currency regime adopted in February 2009 in favour of reviving the defunct local unit.
Government has since assured the nation that the multi-currency regime would remain in force for the foreseeable future as part of measures to ensure stability and stimulate economic growth.
Chinamsa is credited with formerly dollarising the economy in February 2009 when he was acting finance minister as part of measures to contain raging inflation and stabilise the economy.
Chinamasa said captains of industry and commerce should “urgently” increase industrial capacity utilization and boost production.
“Domestic resources mobilization is playing an instrumental role in improving standards of the people of Africa. This is so because domestic revenue is increasingly being used for infrastructural development, poverty reduction initiatives, provision of social service, employment creation and self-sustenance in developing countries,” he said.
He said this had been largely necessitated by the incessant global economic crises perennial droughts as well as withdrawal of donor funding.
“Please keep on promoting Zimbabwe’s economic growth and social development through honouring your tax obligations,” Chinamasa said.