It queried the Finance Ministry’s projected revenue of $392 million from customs this year. It argued that the customs duty revenue does not reflect the present volume of imports to Zimbabwe, which closed the year 2012 at about $8 billion – which is true.
According to the report, given that the average import duty rate was 35 percent, customs revenue should be somewhere around $2.5 billion. It demanded a probe into customs duty paid for vehicle imports, saying billions were not being accounted for because of corruption.
The part which prompted me to put pen to paper is where the report alleged that the finance minister gave no explanation for this huge revenue disparity – a move noted to be of great concern by this parliamentary committee.
Our MPs are the ones who approve every budget before it is implemented, which implies that they would have critically analysed and understood the contents. For them to recommend a tax probe on customs duty appears to reflect a lack of understanding of the recent budget statements.
The Finance Minister, in all his 2012 fiscal policy statements, tried to explain the issue of customs duty not being proportional to the level of imports. Could the committee’s report mean they did not understand the budget contents appropriately?
Let’s first look at a baseline survey conducted by Parliament, with support from EU and UNDP, on Sector Specific Capacity Building Requirements for Committees of the Zimbabwe Parliament.
According to the survey, 65 percent of MPs still require intensive training in legislation and budget analysis. The survey said parliamentary portfolio committees lacked the required competencies to deliver on their core duties of critically analysing budgets and national policies, adding that they merely fast track the passing of legislation because they lack basic understanding of the issues.
I will now prove that the finance ministry has always satisfactorily explained the disparity of low customs duty versus high imports – so resources should not be wasted in re-inventing the wheel.
The reader will be amazed to realise that the last three fiscal policies were awash with the causes, effects and solutions of this customs revenue anomaly.
2012 Budget
As part of the 2012 national budget, one of the revenue enhancing measures discussed was enhancing efficiency in tax administration. The budget actually underscored that ZIMRA plays a strategic role of revenue collection and trade facilitation, which is pivotal to the growth and development of the economy. Against that conviction, the need to focus on the implementation of a number of programmes that are critical to efficient service delivery was highlighted.
The budget identified the need to automate so as to complete the tax administration reform and enhance the efficiency of tax administration. Automation would facilitate fast clearance of goods, reduce interface between taxpayers and the tax administrators, thereby minimising corruption.
The budget also pointed out incidences of corruption at border posts which have led to revenue leakages. The incidences which were identified include bribery of customs officials, false and under-declarations, abuse of Certificates of Origin, use of undesignated entry or exit points and abuse of Business Partnership Numbers and travellers’ rebate.
Having explained these causes of low import duty, the budget went on to propose the streamlining of ZIMRA along its core functions of tax administration and trade facilitation, with a view to strengthen efficiency. Citizens were also urged to join hands with government in order to fight corruption.
2012 Midterm Review
Again, in the midterm budget statement of 2012, the fiscal authorities emphasised the need to strengthen ZIMRA systems. It was noted that, although the volume of imports were continuing to rise, customs duty collection remained low. During that period, customs duty was translating to an average actual customs duty rate of 5 percent, compared to legislated duty rates which ranges from 5-40 percent and, hence, not commensurate with the actual trade volumes.
Accordingly, the budget announced that ZIMRA systems at Ports of Entry would be strengthened, especially at Beitbridge Border Post, through automation, post clearance audit, risk management and anti-smuggling, curbing abuse of the SADC Rules of Origin Certificate and implementation of the Standard Valuation Method of second hand motor vehicles in order to minimise rent seeking behaviour, that way enhancing revenue inflows from import duties.
The same budget review announced that efforts were underway to get the much awaited construction of the Beit Bridge Border Entry Port, on a Built-Operate-Transfer basis.
All these were solutions to address the customs duty anomaly. It is distressing that the parliamentary committee seems to have completely ignored them – or, worse, failed to understand them.
2013 Budget
The 2013 budget was considered by the parliamentary committee in isolation – which is why it arrived at the conclusion that the Minister of Finance gave no explanation of the huge disparity between low customs duties vis a vis increasing imports.
As the minister had in his previous fiscal policies explained the disparity, he only alluded in the 2013 budget to the fact that imports were expected to exceed $8 billion in 2012 and that customs duties reflected only 4.8 percent of imports trade; when, as argued by the parliamentary committee, the average import duty was in fact 35 percent
It should therefore be noted that since the minister had already explained the background of this matter in previous budgets, he only focused on the solutions. This is why, in the 2013 budget, he announced the need to automate Beitbridge Border Post, deepen the post clearance audit, strengthen risk management measures, curb abuse of Certificates of Origin and use of the standard valuation method with regards to taxation of used cars.
Post published in: Business