Enacy Mapakame Business Reporter
Government projects revenue collections for 2021 to reach $390,8 billion, representing 16,4 percent of the country’s total Gross Domestic Product (GDP).
Presenting the 2021 National Budget yesterday, Finance and Economic Development Minister Professor Mthuli Ncube, said this will be underpinned by the anticipated increased economic activity especially in mining and agriculture.
Overally, the economy is projected to rebound by 7,4 percent from a consecutive two-year downturn.
Zimbabwe is highly depended on agriculture and there are chances that the 2020/21 season will receive normal to above normal rainfall, while improved access and timely financing of the sector will be a boost to productivity and the entire economy.
“Based on anticipated improvement in economic activity in 2021, Treasury projects to collect revenues amounting to $390,8 billion, (which is) 16,4 percent of GDP, a slight improvement from 16,3 percent estimated for 2020,” said Minister Ncube.
Personal income tax, corporate tax and Value Added Tax (VAT) and excise duty are expected to contribute significantly to the revenue accounting for an estimated $72 billion, $73 billion, $94 billion and $60 billion in that order.
However, a budget deficit of $30,8 billion ( minus 1,3 percent of GDP) is targeted in 2021, a slight increase from minus 0,5 percent of GDP anticipated in 2020.
The Treasury boss said the targeted fiscal deficit is also in line with the fiscal consolidation stance which strictly limits the fiscal targeted deficit to below 2 percent of GDP throughout the National Development Strategy 1 period to 2025.
He said: “The target is also within the SADC macroeconomic convergence threshold of below 3 percent of GDP and builds on achievements made in 2019 and 2020.
“In terms of financing, the entire deficit will be met through the domestic market.
“The domestic borrowing plan below includes provision for other borrowings related to cash smoothening operations.”
For 2020, Treasury projects total revenue collection to reach $173 billion by year end against estimated expenditures of $162 billion.
Of the total expenditures, employment costs are expected to account for 39,9 percent due to bonus payments as well as employment costs of recently recruited employees in the critical sectors, which are education and health.
The Treasury boss estimates capital expenditure and net lending to reach 33,6 percent of total expenditure.
During the nine months to September 30, 2020, cumulative revenue collections stood at $88,7 billion, against a target of $72,2 billion, giving a positive variance of 22,7 percent. Of this amount, tax revenues amounted to $86,6 billion against a target of $71,5 billion, while non-tax revenue amounted to $2 billion. Figures from Treasury show that major contributors to total revenue collections were Tax on Income and Profits (TIP) at 35 percent. This revenue head comprise of individuals tax, companies’ tax’, domestic dividends and interest, presumptive tax as well as other income taxes.
VAT and Excise duties followed at 25 percent and 14 percent respectively.
“The Budget was generally in the surplus over the period January to September 2020, save for March, April and July, where there were pressures for mitigating the impact of the Covid-19, cushioning of civil servants as well as other operational cost escalations,” said Minister Ncube.
Initiatives such as increasing compliance through implementation of a compliance management programme and fighting corruption, prosecuting tax evasion offenders and plugging leakages at ports of entry are expected to boost revenue collections.