REVENUE PERFORMANCE REPORT FOR THE YEAR

ENDED 31 DECEMBER 2017

Mrs W. Bonyongwe

ZIMRA Board Chairman

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Preamble

This report covers revenue performance for the fourth quarter of 2017, as well as for the whole year. The
quarter was historic in the sense that in November 2017, Zimbabwe witnessed a change in Government and
saw the retirement of former President Robert Gabriel Mugabe after 37 years in power. He was replaced by
President Emmerson Dambudzo Mnangagwa who is perceived to be pro-business, raising serious
expectations that foreign capital inflows would increase. This is much needed for infrastructural
development and to boost domestic productive capacity.

The Gross Domestic Product (GDP) for 2017 was officially revised upwards from 1.7% to 3.7% in the
Ministry of Finance and Economic Development’s Mid-Term Budget Review Statement in July 2017. The
growth drivers being the strong performance by the agriculture sector, increase in production in the mining
sector, combined with an improvement in global mineral prices. Government’s expansion of the Command
Agriculture to cover more crops and the inclusion of livestock, poultry and fishery to the mix should further
boost the growth of this sector further. The National Budget Statement for 2018 projected GDP growth rate
to rise to 4.5% from 3.7% in 2017. This translated to a projected revenue target of US$4.3 billion for 2018,
up from US$3.4 billion for 2017, which the Zimbabwe Revenue Authority (ZIMRA) is geared to meet.

To spur local production for export, the Reserve Bank of Zimbabwe increased the bond note export incentive
from 5% to 12.5%. However, the major constraint remains the inadequate foreign exchange available in
the economy. The Reserve Bank has also arranged a US$600 million Nostro Stabilisation Facility from the
African Export Import Bank (Afreximbank) to ease the current delays in the processing of foreign payments
by banks for the procurement of productive inputs as part of measures to stabilise the economy. But this is
not enough to meet the huge pent up demand for foreign exchange. The challenge is for the Government to
translate the positive investor sentiment into real inflows. Realistically though, not much capital inflows are
likely to be realised until after elections.

The pronouncement for an amnesty by the President of the Republic of Zimbabwe to individuals and
corporates involved in the illegal externalisation of assets to repatriate them to Zimbabwe, if heeded fully,
is expected to contribute to foreign currency injections and ease the foreign currency shortages. The Reserve
Bank of Zimbabwe has indicated that the capital has indeed started flowing in, but unfortunately, they did
not provide any figures. If it is significant, it will be a major boost to the economy.

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The Zimbabwe Stock Exchange (ZSE) was bullish for the greater part of the year. Capitalisation shot up
from just under US$4 billion in January 2017 to over US$15 billion in November 2017, raising fears of
excessive money creation similar to the case during the peak of hyperinflation in 2008. However, the local
political events dampened the bulls somewhat and the market capitalisation ended the year at US$9.6
billion, which is a rise of 140% during the year hence fuelling inflation growth.

The liquidity crunch continued to the end of the year, leading to the multi-tier pricing system in the economy
generating significant inflationary pressures. Multi-tier pricing also boosted the parallel currency market,
and despite the gazetting of Statutory Instrument122A of 2017 to criminalise currency trading to control the
rapidly expanding currency parallel market, the practice still exists.

Year-on-year inflation rate for 2017 increased significantly from -0.65% in January 2017, only to close the
year at 3.46%. This is very worrying and could erode the benefits of all initiatives to sustain positive
economic growth. To curb inflation, there is need to destroy the parallel market but as indicated above, this
is not achievable in the short term, other things remaining equal. There are also indefensible price increases
in the supermarkets of up to 200%, fuelling inflation further, and in a US$ environment, rising inflation
becomes a major threat to economic growth.

The Zimbabwe Revenue Authority maintained robust revenue enhancement strategies throughout the year
to uphold efficiency in revenue mobilisation. This has been demonstrated through:
 Implementation of the Electronic Cargo Tracking System and automation of Invoice Management
System.
 Granting of a Moratorium to SMEs in collaboration with the Ministry of Small and Medium
Enterprises in January 2017, which expired on 30 June 2017 where ZIMRA registered 12992
taxpayers. This led to significant increase in the taxpayer base from new registrations.
 Risk-based audits and investigations, closer follow up and monitoring of payments and remittances
and increased stakeholder engagement.
 A consistent hard stance in the fight against corruption as well as use of the whistle blower facility,
toll free anti-corruption hotline and strengthening of supervision across functions.

Major strides in revenue collections were achieved during the year because of a number of positive
economic developments in the operating environment. Even after factoring in rising inflation, the
performance was relatively good, other things being equal.

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An opening debt of US$2.67 billion in January 2017 increased by US$1.29 billion after recoveries of
US$20.74 million, leading to a closing balance of US$3.94 billion as at 31st December 2017.Total debt,
therefore, increased by 47.57% during the year.

Revenue Performance
Fourth Quarter 2017 Performance
Gross collections for the fourth quarter (Q4 2017) amounted to US$1.159 billion. Net collections stood at
US$1.081 billion after deducting refunds amounting to US$78.06 million. The target for the quarter was
US$880.43 million. Net collections surpassed the target by 22.78%. The 2017 fourth quarter revenue
performance was 28.12% above the US$843.74 million collected during the same period in 2016. The
major performing tax heads were Company Tax, Tax on Dividends, Fees, Interest & Remittances, CGT &
CGT Withholding Tax, VAT on Local Sales, Mining Royalties and Other Indirect Taxes.

Annual Performance 2017

Gross annual collections amounted to US$3.978 billion. Net collections after deducting refunds of
US$228.28 million amounted to US$3.750 billion against a target of US$3.400 billion. This gives a
positive variance of 10.29%. Net revenue collections for the year 2017 improved by 15.46% from the
US$3.248 billion collected in the year 2016.The concerted effort by the Authority through rigorous revenue
enhancement measures, an unwavering stance against corruption and resultant improved compliance by
taxpayers contributed to this positive revenue performance.

Figure 1 below shows a comparison of performance for 2016 vs 2017

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 2016/2017 Revenue Comparison

3,978.00
3,750.00
4,000.00 3,607.00
3,400.00 3,462.00
3,248.00
3,500.00
Amount US$ Million

3,000.00

2,500.00

2,000.00

1,500.00

1,000.00

500.00

0.00
MOF GROSS NET
2016 3,607.00 3,462.00 3,248.00
2017 3,400.00 3,978.00 3,750.00

Figure 1: 2016 and 2017 Revenue Contributions

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Table 1 shows performance per revenue head for 2017

Table 1: 2017 Collections vs Targets

TAX HEAD TARGET 2017 ACTUALS 2017 VARIANCE US$ %

US$ US$ VARIANCE
Individual Tax 763,000,000.00 490,011,929.78 (272,988,070.22) -35.78%
Company Tax 337,200,000.00 730,496,981.71 393,296,981.71 116.64%
Net VAT on Local Sales 666,235,000.00 687,083,586.97 20,848,586.97 3.13%
VAT on Imports 345,900,000.00 387,923,332.91 42,023,332.91 12.15%
Net Customs Duty 287,540,000.00 295,750,282.21 8,210,282.21 2.86%
Excise Duty 674,716,000.00 675,897,301.43 1,181,301.43 0.18%
Carbon Tax 35,340,000.00 30,367,584.15 (4,972,415.85) -14.07%
Mining Royalties 68,770,000.00 73,111,798.69 4,341,798.69 6.31%
DFIR (Dividend, Fees, 67,035,000.01 56,839,438.51 (10,195,561.49) -15.21%
Interest & Remittances)
WHT on Contracts 87,510,000.00 126,446,817.08 38,936,817.08 44.49%
Other Taxes: 66,844,000.00 83,500,611.78 16,656,611.78 24.92%
CGT & CGT WHT 29,000,000.00 30,317,613.77 1,317,613.77 4.54%
Tobacco Levy 10,904,000.00 13,707,986.44 2,803,986.44 25.72%
Other Indirect Taxes 26,940,000.00 39,475,011.57 12,535,011.57 46.53%
Net Non-Tax Revenue 112,541,950.68 112,541,950.68
NET REVENUE 3,400,090,000.01 3,749,971,615.89 349,881,615.88 10.29%
GROSS REVENUE 3,400,090,000.01 3,978,247,578.44 578,157,578.43 17.00%

Company Tax, VAT on Local Sales, VAT on Imports, Customs Duty, Excise Duty, Mining Royalties,
Withholding Tax on Contracts and Other Indirect Taxes surpassed their set targets for the year 2017.
The performance of Individual Tax, which was consistently affected by negative factors in the operating
environment characterised by downsizing and retrenchments, fell short of its 2017 target by 35.78%.
Other revenue heads such as Carbon Tax and Dividend, Fees, Interest and Remittances(DFIR) also did
not meet their set targets.

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2016 and 2017 Annual Net Revenue Collections Comparison
The following bar graph shows a comparison of revenue collections for 2016 and 2017, and the 2017
target per revenue head.

2016 & 2017 Actual Collections and 2017 Target

800,000,000.00

600,000,000.00

400,000,000.00

200,000,000.00

0.00
Indivi Comp VAT VAT Custo Excise Carbo Minin DFIR WHT Other Net
duals any Local on ms Duty n Tax g on Indire Non-
Tax Sales Impor Duty Royal Contr ct Tax
ts ties acts Taxes
Actuals 2016 736,530 340,718 601,220 358,251 272,385 640,297 32,464, 62,901, 55,722, 72,422, 56,365, 18,858,
Actuals 2017 490,011 730,496 687,083 387,923 295,750 675,897 30,367, 73,111, 56,839, 126,446 83,500, 112,541
Target 2017 763,000 337,200 666,235 345,900 287,540 674,716 35,340, 68,770, 67,035, 87,510, 66,844, 0.00

Figure 2: Annual Performance: 2016 Actual, 2017 Actual and 2017 Target

The year 2017 has seen consistency in positive performance for most revenue heads, except Individual
Tax, Carbon Tax and DFIR. The concerted implementation of revenue enhancement measures by the
Authority enabled steady inflows and reduced revenue leakages despite the negative factors in the
operating environment.

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 Quarterly Performance for 2016, 2017 and Quarterly Targets for 2017
Figure 3 below shows a combined 2016/2017 quarterly and annual performance comparison against the
Ministry of Finance and Economic Development 2017 targets.

2016 Actual, 2017 Actual and 2017 MOF Target

4,000.00
Amount US$ Million

3,500.00
3,000.00
2,500.00
2,000.00
1,500.00
1,000.00
500.00
0.00
Q1 Q2 Q3 Q4 Annual
Actual 2016 724.89 825.34 854.17 843.74 3,248.14
Actual 2017 826.63 874.64 967.76 1,081.00 3,750.03
Target 2017 812.94 843.16 863.56 880.43 3,400.09

Figure 3: Quarterly performance: 2016 Actual, 2017 Actual and 2017 Target

The performance shows progressive increase in revenue inflows over the four quarters. This is expected
to pick up pace and be more defined in 2018 as extra efficiency measures are expected to be applied.

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 Monthly Actual Collections and Variance for2017 and 2016
Figure 4 shows a comparative presentation of the annual collections for 2017 and 2016 on a monthly
basis.

40.00%
Monthly Actual Collections 2016 vs 2017
450.00

35.00% 400.00
30.00% 350.00
25.00%
300.00
20.00%
%VARIANCE

AMOUNT
250.00
15.00%
200.00
10.00%
150.00
5.00%

0.00% 100.00

-5.00% 50.00

-10.00% 0.00
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Actual 2017 262.1 246.7 317.2 247.9 290.6 336.0 286.4 307.9 338.2 320.4 335.3 425.1
Actual 2016 232. 235. 260. 265. 233. 325. 246.2 256.0 351.9 261.7 249.9 332.0
Variance 12.98 4.59% 21.86 -6.70 24.23 3.19% 16.36 20.29 -3.89 22.41 34.21 28.02

Figure 4:2017 vs 2016 actual collections

Revenue collections for 2017 outperformed the 2016 collections, except for April 2017 and September
2017 where the revenue targets were marginally missed by 6.70% and 3.89% correspondingly. The
overall 2017 annual performance, however, remained way above the 2016 collections.

Revenue enhancement measures such as automation, the Electronic Cargo Tracking System, risk-based
audits, awareness campaigns and anti-corruption initiatives that were implemented by the Authority
throughout the year were key factors to the positive performance.

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 Revenue Heads’ Contribution

2017 & 2016 REVENUE CONTRIBUTION TO TOTAL ACTUAL

COLLECTIONS & REVENUE GROWTH
25.00% 600.00%
500.00%
20.00%

Revenue Growth
400.00%
% Contribution

15.00% 300.00%

10.00% 200.00%
100.00%
5.00%
0.00%
0.00% -100.00%
Net VAT Net WHT
Mining Net
Individ Compa VAT on Custo Excise Carbon on Other
Royalti DFIR Non-
uals nies Local Import ms Duty Tax Contra Taxes
es Tax
Sales s Duty cts
2016 22.68% 10.49% 18.51% 11.03% 8.39% 19.71% 1.00% 1.94% 1.72% 2.23% 1.74% 0.58%
2017 13.07% 19.48% 18.32% 10.34% 7.89% 18.02% 0.81% 1.95% 1.52% 3.37% 2.23% 3.00%
Growth -33.47% 114.40% 14.28% 8.28% 8.58% 5.56% -6.46% 16.23% 2.00% 74.60% 48.14% 496.75%

Figure 5: Revenue Heads' Contribution to Revenue Collections and Revenue Growth

The graph shows positive revenue growth in all the revenue heads during the year 2017, except for
Individual Tax and Carbon Tax, which recorded negative growth of 33.47% and 6.46% respectively.
Company Tax grew by 114.40%, Mining Royalties improved by 16.23%, Withholding Tax on Contracts
increased by 74.60% and Other Taxes grew by 48.14%.

Analysis of the Specific Revenue Heads’ Performance

Individual Tax
Revenue collections under this revenue head amounted to US$490.01 million, which was 64.22% of the
targeted US$763.00 million, translating to a decline of 33.47% from the US$736.53 million collected in
2016. The Pay as You Earn debt as at the end of the year increased by 24.46% to US$824.11 million,
compared to US$662.16 million in 2016. The increasing debt continues to compromise the tax base and
collections under this revenue head.

Salary cuts, retrenchments and irregular salary payments by some companies affected the performance of
this revenue head during the year. However, there is a lot of non-compliance among the majority of people
who are working especially for small-to-medium enterprises and those who are self-employed.

Corporate Income Tax (Company Tax)

Revenue collections from Company Tax amounted to US$730.50 million against a target of US$337.20.00
million to give a positive variance of 116.64%. Revenue collections during 2017 increased by 114.40%

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from the US$340.72 million collected in 2016. Corporate Income Tax debt was US$1.462 billion,
compared to US$751.49 million in 2016.

The positive performance can be attributed to improved profitability by some companies especially in the
financial services sector. Increased use of electronic transactions also enhanced inflows, with the added
advantage of traceable transactions for audit purposes.

VAT on Local sales

Gross VAT on Local Sales collections for the year 2017 amounted to US$913.41 million against a target
of US$666.24 million, resulting in a positive variance of 37.10%. VAT refunds for the year 2017 amounted
to US$226.33 million, which translates to net collections of US$687.08 million. Net revenue collections
surpassed the target by 3.13% and revenue grew by 14.28% from the US$601.22 million collected in 2016.

VAT refunds continue to negatively affect this revenue head. The refunds bill went up by 6.96% to
US$226.33 from the US$211.60 million that was refunded in 2016. VAT on Local Sales debt amounted to
US$1.297 billion, as compared to US$1.020 billion in the prior year. The introduction of 10% Value Added
Withholding Tax with effect from 1stApril 2017 is a move that has shown marked improvement in the
revenue collections for this tax head.

Again, the increased usage of plastic money, which produces an audit trail of records, has enhanced revenue
collections and compliance. The Tax Management System initiative, audits, investigations and debt
recoveries employed by the Authority have also produced positive results.

VAT on Imports
Annual revenue collections amounting to US$387.92 million surpassed the target of US$345.90 million by
12.15%. Revenue collections under VAT on Imports grew by 8.28% from the US$358.25 million realised
in 2016 to US$387.92 million in 2016. The continued importation of VAT attracting goods, including raw
materials and finished goods, as well as increased foreign currency availability, enhanced the performance
of the revenue head.

Customs Duty
Annual gross revenue collections amounted to US$296.09 million against a target of US$287.54 million.
Revenue target was surpassed by 2.97%. Refunds of US$339.28 million resulted in net collections of
US$295.75 million. There was a growth in revenue of 8.58% from the US$272.39 million that was
collected in 2016.

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Improved foreign currency availability to priority duty-paying imports enhanced performance of the
revenue head in 2017. Going forward, the performance of the revenue head is expected to remain depressed
unless the foreign currency supplies improve.

Excise Duty
Revenue from Excise Duty amounted to US$675.90 million against a target of US$674.72 million. Revenue
target was surpassed by 0.18%. Excise Duty on fuel was the major contributor to this tax head, with a
contribution of 78.62%. Excise Duties on beer and airtime were 6.96% and 8.09%, respectively. The rest
of the revenue was from Excise Duty on tobacco, wines and spirits, second-hand motor vehicles and electric
lamps. In 2017, revenue collections grew by 5.56% from the US$640.30 million collected in 2016. The
revenue head’s increased positive performance can be attributed to sustained paraffin imports which now
attract duty and the Electronic Cargo Tracking System, which greatly reduced transit fraud. Low disposable
income affected consumption of other excisable products.

Withholding Tax on Contracts

Revenue collections for 2017 were US$126.45 million, which was 44.49% of the targeted US$87.51
million. Revenue collections went up by 74.60% from the US$72.42 million which was realised in 2016.
Withholding Tax on Contracts is a function of business activity in the economy as well as compliance levels.
The performance of the revenue head is expected to maintain this positive trend if economic conditions
improve.

Carbon Tax
Carbon Tax collections were US$30.37 million against a target of US$35.34 million, resulting in 85.93%
of the targeted revenue being realised. Revenue collections decreased by 6.46% from the US$32.46
million collected in 2016. The performance of the revenue head is dependent on the import volumes of
petrol and diesel. With improved availability of foreign currency to import petroleum products, the revenue
head is expected to perform better, owing to an increase in the consumption of petrol and diesel.

Mining Royalties
Revenue collections under this revenue head amounted to US$73.11 million against a target of US$68.77
million, translating to a positive variance of 6.31%.

The future performance of the revenue head is influenced by the movement in global prices of minerals;
production levels of key minerals such as gold, platinum and diamonds; and level of sales of mineral
products. Currently, these prices continue to fluctuate.

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The positive performance of this revenue head hinges on increased diamond production and expected
increased foreign investment in the mining sector following review of the indigenisation legislation.

Dividends, Fees, Interest& Remittances

Collections amounted to US$56.84 million against a target of US$67.04 million, translating to a negative
variance of 15.20%. The 2017 collections grew by 2.0%% when compared to 2016 collections of
US$55.72 million.

The subdued performance of the revenue head can be attributed to low investment levels in the economy.
However, with more investment activities and improved economic activities, performance is likely to
improve in 2018.

Other Taxes
This composite revenue head comprises Capital Gains Tax and Capital Gains Withholding Tax, Tobacco
Levy and Other Indirect Taxes (Stamp Duty, Banking Levy, Presumptive Tax and ATM Levy).

Revenue collections were US$83.50 million against a target of US$66.84 million, giving a variance of
24.92%. In 2017, collections increased by 48.14% from the 2016 collections of US$56.37 million.
Major contributors to this revenue head were Capital Gains Tax and Capital Gains Withholding Tax. The
positive performance of the revenue head is attributed to an increase in gains from tobacco sales
following a good growing and marketing season. Tobacco Levy surpassed its own target by 25.72%.

The property market remained subdued due to low mortgage funding while the securities market reacted
negatively to the issues related to political events in November/ December 2017.

Presumptive Tax saw reduced rates in the 2017 National Budget. This sector, which is dominated by
informal traders, remains challenged by low taxpayer compliance.

The future performance of this collective cluster of revenue heads is dependent on availability of
mortgage funding, investor confidence on the stock market, a good agriculture season and increased
compliance by informal traders under the Presumptive Tax regime.

Conclusion
Revenue performance for the year 2017 was encouraging notwithstanding the challenges in the operating
environment. The implementation of a collection of enhancement measures assisted in the mobilisation
of resources. Corruption was systemic and institutional in ZIMRA for some time, and tackling it cannot
be easy. Changing a culture always takes time and a change of mindset, but the persistent fight against
corruption is slowly bearing fruits. We reiterate that success in endeavour cannot be achieved by

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ZIMRA’s lone efforts. There is need for support and commitment from other law enforcement agencies
and to politically walk the talk.

Compliance
The level of compliance is still very low and there are several economic units with no relationship to the
Revenue Authority. This is living dangerously because when ZIMRA catches up there will be penalties
to pay. In 2018, one of the goals of ZIMRA is to bring in all those who are outside the net because it is
not fair for a few people to carry the fiscal burden of the nation. There is continuous staff training to
identify the evaders. We will also be sharing the data bases of relevant stakeholders to bring evaders into
the net. Meanwhile, we are urging Zimbabweans to have the culture of tax compliance because it is tax
revenue which enables Government to deliver services and develop infrastructure.

Apology
On behalf of the ZIMRA Board, I would like to take this opportunity to apologise heartily to all those
who were inconvenienced by the system failure of our Automated System for Customs Data
(ASYCUDA) World at our ports of entry. Some people spent several days at the borders, we are truly
sorry. Currently, we are working tirelessly to establish the reason for the failure, and we promise that it
will not happen again. The ASYCUDA System is offered by UNCTAD and is widely used globally by
several countries, including within the region. Its integrity is, therefore, generally unquestionable.
ZIMRA has used that system since the early 90’s and the Authority has been gradually upgrading
ASYCUDA over the years. ZIMRA has sought the assistance of UNCTAD and other experts to look into
what led to the system to crash, amongst other things, we expect a report in the next few weeks. ZIMRA
is happy to announce that we now have a substantive Director of ICT, which should help matters in this
area. The parent Ministry and the Reserve Bank of Zimbabwe have also committed themselves to support
ZIMRA by availing sufficient foreign currency to finance the capital requirements for the Authority’s
ICT systems.

I would also like to apologise for the congestion being experienced in the e-service platform but lately
we have observed that the system is processing an increasing number of Tax Clearance Certificates daily.
For the current year, we started issuing tax clearance certificates on 23rd December for those who would
have met all their obligations. It worked well for others but we will continue to try all means to improve
the speed for next year. We thank you for your patience and the ZIMRA officers are available to assist
those who still encounter problems.

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Gratitude
I remain sincerely grateful to the Minister of Finance and Economic Development, Honourable P. A.
Chinamasa (MP), the Permanent Secretary, Ministry officials and the entire Government of Zimbabwe
for the unwavering support given to the Zimbabwe Revenue Authority during the past eventful year.

Special mention also goes to my fellow Board members who, as usual, continue to dedicate time and
resources for the steering of this Authority towards its consistent great performance.

To the taxpaying community, all those patriotic businesses and individuals who religiously made their
contributions to the fiscus in full and on time despite the challenging operating environment, I say thank
you for the crucial role you continue to play in the development of the economy of this country.

To all other members of the public, for your continuous feedback and intelligence, particularly in helping
in the fight against corruption, I say thank you. The Authority will continue to put to good use the
valuable information, advice and suggestions you provide.

I would like to convey my gratitude to the Acting Commissioner General Mr H. Kuzvinzwa,

Management and Staff in ZIMRA for the sterling performance in the execution of their functions.
However, we should not relax because there is still more to be done.

Finally, all glory goes to God Almighty, the Creator, who provided guidance, wisdom and good health
to enable us all to achieve the 2017 goals. 1 Chronicles 29 v 13: Now, therefore, our God, we thank
thee and praise thy glorious Name.

I thank you.

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