THE Zimbabwe Revenue Authority (Zimra) has warned of more company closures, scaling down of operations and a subsequent decline in company tax as Treasury continues to operate under tight fiscal space.
Treasury last year missed its revenue target for the year ending December 2013 by 8% on the back of underperformance of diamond revenue and massive company closures amid a relentless push by the civil service to increase the wage bill.
Last year Finance minister Patrick Chinamasa presented a $4,1 billion budget for 2014.
According to year-end figures released by the tax collector yesterday, total net-of-refunds collections for the year 2013 amounted to $3,43 billion against a target of $3,64 billion resulting in a negative variance of 6%.
The year 2013 saw a number of companies scaling down operations and others closing shop resulting in the government collecting $401 million in company tax from a target of $457,4 million.
During the year under review, capacity utilisation for the manufacturing sector dropped to 39,6% from 44,6% in 2012.
“The revenue head (company tax) is expected to drop significantly in 2014 if the current environment persists as more companies are likely to scale down operations,” said Zimra chairman Sternford Moyo.
He said the repeal of the deductibility of mineral royalties as an allowable deduction would, however, have a slight positive impact on corporate tax collected.
The fourth quarter of 2013, according to Moyo, brought in net collections of $877,6 million against the Finance ministry target of $1,1 billion resulting in a negative variance of 18%.
“The year 2013 was characterised by many challenges that created a very difficult environment for businesses and consequently for revenue collection. Challenges such as the liquidity crunch coupled with low industrial capacity utilisation, among others, saw the tax base shrinking,” Moyo said.