Online Reporter
THE fast economic growth this year is seeing more companies making better profits, more people earning above minimum levels, more money being spent by businesses and individuals and so more tax being collected.
Zimra efforts, backed by other agencies, to ensure those who owe tax pay and smuggling and tax dodging are continually reduced means the monies owed are being collected more efficiently.
The result is that the Government is likely to have almost US$1 billion more than was forecast in the Budget at the end of last year, almost 10 percent more money, and with US$10,3 billion now forecast will have about a third more than the US$7,6 billion or its equivalent collected last year.
The slashing and consolidation of many business and licence fees has had a far less severe effect on revenue collection, and has been more than covered by better-than-expected collection of other taxes, such as customs duty, VAT, taxes on business profits and, with more taxpayers earning more money, more individual tax payments.
The high growth of 8,6 percent this year produces a far larger percent rise in revenue as people and businesses move out of survival mode spending only on the bare necessities. The stable currency and the low inflation obviously help as well, as money earned can be used instead of just wasting way and that also means more growth and more taxes.
At the end of last year, the conservative estimate, and the Government in fiscal matters is very conservative, was a little over US$9,4 billion, and that was the figure that was used to plan spending. Since the advent of the Second Republic the Government has categorically refused to even try borrowing money for recurrent expenditure, the consumables and social spending, such as food and income support.
Even capital spending has a large tax component since borrowing is only possible for those capital projects that produce guaranteed income promptly to service the loans. So a lot of the social capital spending on schools, hospitals, most side roads and feeder roads, new courtrooms and many other non-revenue creating works has to come from taxes.
Even as it looks likely that some doors to global institutions will open in the foreseeable future, any borrowing will have to be for that revenue generating infrastructure.
The more than expected tax revenue is, however, not going to see dramatic changes in budgeted expenditure. For a start, as the debt arrears settlement now appears to be likely, we will have to pay our agreed sums on the payment plan that will be eventually agreed although these will be affordable as part of the deal.
We also need to build up the cash buffer to cope with emergencies. The Government has for several years now, set aside each budget uncommitted sums to cope with emergencies. So when Covid-19 hit us, the cash was there to upgrade hospitals and buy vaccines; when drought struck, the Government was able to buy extra food for cash to make sure no one went hungry, and make modest social payments to urban dwellers affected to buy essential food.
No one can predict these sort of emergencies, although considering the range of potential emergencies means that somewhere along the line extra money will suddenly be needed. But when you have that extra money in the bank, the Reserve Bank of Zimbabwe and the commercial banks, you can withdraw it and spend it.
The International Monetary Fund reckons the minimum to be set aside should be around US$275 million, and that is probably as good a guess as anyone’s although we might be wise to have a little more.
An El-Nino is building up in the Pacific Ocean, and world temperatures are hitting their highest this year, so there are increasing odds of less rainfall in the coming season. The Government is taking steps to ameliorate this in advance, which will mean accelerated spending on things like more irrigation, more village boreholes and new seed varieties.
The Government policy in so many areas is to help people help themselves and earn a living, both because this is more sensible and because it is usually cheaper. It costs less, for example, to buy inputs for small-scale farmers under Pfumvuza/Intwasa than buy extra food for wiped-out subsistence farmers. So preparing for less rainfall will cost money, but that will reduce the need for food relief later on.
Social spending, no matter how well-prepared we hope to be, is likely to rise. We need to keep the normal programmes funded and then find extra money for buying extra grain and extra social payments.
The Government, with tax collections rising more than expected, now has the leeway to plan and ensure the country can come through any emergency.
