By Martin Kadzere
THE African Development Bank (AfDB) has approved a US$10,4 million grant towards supporting a new tax management system to enhance Zimbabwe’s capacity to increase domestic revenue mobilisation and plugging leakages.
The grant means the Zimbabwe Revenue Authority (Zimra) will be able to collect maximum revenue, which will in turn be channelled towards the productive sector and other projects of national benefit.
Known as Tax and Accountability Enhancement Project (TAEP), the new modernised tax regime will improve resource mobilisation by Zimra for essential public services and investments.
The enhanced tax system will also improve tax compliance levels and help reduce large fiscal deficits.
Improved tax collection capacity and efficiency are critical in enhancing Government’s capacity to provide essential public services like healthcare, housing, education and funding key infrastructure projects such as electricity generation and road construction.
Zimbabwe requires funding for roads projects, some of which are underway, but have been stalled by financial challenges.
There is also need for funds to expand power generation to end the current situation where most parts of the country can go without electricity for over 15 hours, impacting negatively on the manufacturing, agriculture and mining sectors.
Assessments by the International Monetary Fund (IMF) found that Zimbabwe’s tax and revenue management system — which is key to tax collection, compliance and accountability — is old and does not perform to the expected international standards.
Zimra will receive 90 percent of the grant, while the remainder will go towards capacitating oversight institutions namely Parliament and the Office of the Auditor General.
The national tax collector mobilises 95 percent of State revenue, while the remainder comes from rentals, fees, levies, fines and licenses collected by ministries, departments and agencies.
“The IT (Information Technology) infrastructure modernisation will increase compliance, tackling corruption and increase revenue (collection) efforts,” the AfDB said on Wednesday.
Zimra started automating its tax and revenue management system in 2003 and subsequently upgraded it in 2012 and 2016, but non-tax compliance remains high.
Last year, an IMF Technical Assessment on the tax management system noted that Zimra was operating a complex and costly system, which offered basic core functions of taxpayer registration, assessment and payment.
Zimra Commissioner General Ms Faith Mazani yesterday said the project would help build an efficient tax management system that would enhance revenue collection capacity.
Without stating figures, Ms Mazani said non-compliance levels among taxpayers remained significant.
AfDB senior policy analyst Mr Erick Mariga told The Herald that the project was aligned with the Transitional Stabilisation Programme (TSP), which prioritises fiscal consolidation, economic stabilisation and growth, and employment creation.
Zimbabwe continues to face socio-economic challenges arising from macroeconomic challenges including high inflation, high formal unemployment, debt arrears, cash shortages, external shocks and infrastructure challenges and power supply.
The volatile macroeconomic environment has led to rising debt levels, deteriorating service delivery and social well-being.
Resource constraints have compounded the challenges, hence the need to improve revenue collection to support social services.
The AfDB’s fragility assessment for Zimbabwe has identified lack of effective institutions.
The project will provide targeted support to selected Parliamentary portfolio committees.
“Through well-targeted capacity building intervention, the project will make a significant contribution to addressing institutional and human capacity constraints that impact negatively on service delivery by Zimra, Parliament and Office of the Auditor General,” said the AfDB.