GOVERNMENT has lost a massive 66% of its potential tax revenue since the launch of the controversial price blitz in July, businessdigest can revea
A report seen by businessdigest shows that government will lose $20 trillion of its potential revenue from corporate tax and valued-added tax (VAT) because of the price controls and current shortage of basic commodities.
The report also shows that because of the revenue loss the budget deficit will exceed 63% of gross domestic product.
Under normal circumstances, the government is supposed to rely on tax revenue to fund its operations.
Government had this year projected to collect $30,2 trillion in tax and duty. An initial assessment of the impact of the crackdown done by the Zimbabwe Revenue Authority (Zimra) had projected a potential revenue loss of $13,1 trillion. The gap has however increased to $20,2 trillion.
More revenue will also be lost on VAT because most retail shops have not received any stock for the past three months.
Zimra, which collects taxes on behalf of government, is also bleeding because of the price blitz, the report said.
Zimra will also experience huge outflows through VAT refunds because of increase company claims.
Government will also lose trillions of dollars in potential income tax because of increase unemployment. Thousands have lost their jobs since the blitz started in July.
The few workers that remain in their jobs will pay fewer taxes because their working hours have been reduced.
Companies like Innscor, Blue Ribbon and OK Zimbabwe have reduced their working hours to cut on overheads.
Other companies have sent workers on unpaid leave making it impossible for government to collect any income tax from them.
The report said the few products that are being manufactured are finding their way onto the informal market where government does not have the structures to collect taxes. With no revenue government will have to fund its operations from borrowing on the domestic market, a move that economists say will fuel inflation.
As of September 2 government’s domestic debt was $8,1 trillion, an indication that the state has increased its reliance on borrowings to fund operations.
Economists say the government will supplement the income from borrowings by printing money.
The central bank has pledged to revive the production through at concessionary rates of 25% but analysts say money will have to be printed to fund the operation.