ZRA 2020 Revenue Report Final.pdf

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TAX REVENUE PERFORMANCE REPORT IN 2020

YEAR TO DATE COLLECTION ANALYSIS

1) Revenue Outlook in 2020

a) The 2020 Parliament Tax Revenue Target and Macroeconomic assumptions

For the year 2020, the Government had set to achieve the following macroeconomic objectives;

• To achieve a real GDP growth rate of at least 3 percent;

• To achieve and maintain inflation within the target range of 6 to 8 percent;

• To increase international reserves to at least 2.5 months of import cover;

• To Reduce the fiscal deficit to 5.5 percent of GDP; and

• To increase domestic revenue mobilization to at least 22 percent of GDP.

The achievement of the 2020 macroeconomic objectives by the Government was anchored on the five pillars of the Seventh National Development Plan, namely; economic diversification and job creation, reducing poverty and vulnerability, reducing development inequalities, enhancing human development and creating a conducive governance environment for a diversified and inclusive economy.

The macroeconomic assumptions for the 2020 projection were as follows:

Table 1: Macroeconomic assumptions for the 2020 Budget

# Variable Projection

1 Inflation Rate 7.00%

2 Exchange Rate (change) 3.91%

3 Import Volume (Change) 6.86%

4 GDP Deflator 5.20%

5 Nominal GDP Growth Rate 3.20%

6 Nominal GDP, K' Millions 326,937.70

7 Production volumes (change) 4.05%

8 Copper prices (change) 0.82%

The total projected revenue collection for 2020 was K59, 037.5 million out of which K58,

693.3 million or 99.4 percent is tax revenue (see Table 2). The projected tax revenue collection for 2020 at K58, 693.3 million represents 18.1 percent of GDP. In nominal terms, the 2020 total revenue target of K59, 037.5, is 13.9 percent higher than the 2019’s Parliament target of K51, 844.2 million.

Of the K59, 037.5 million revenue target for the year, the Domestic Taxes Division is expected to contribute K40, 776.0 million or 69.1 percent to the Parliament target, while the

Customs Services Division is expected to account for K18, 261.5 million or 30.9 percent.

Under the Domestic Taxes Division, Direct taxes are expected to contribute 75.1 percent of the revenue and indirect taxes are expected to contribute 24.9 percent.

Table 2 below depicts the breakdown of the percentage contribution for each tax type.

Table 2: The 2020 Parliament Revenue Targets

Amount (k’mn) % of Total

1. Domestic Taxes 40,776.0 69.1%

A. Direct Taxes 30,628.3 51.9%

1. Company tax; o/w 7,903.9 13.4%

Non Mining Company Tax 4,218.4 7.1%

Mining Company Tax 3,685.5 6.2%

2. PAYE 12,331.4 20.9%

3. Withholding taxes & others 5,377.2 9.1%

4. Mineral royalty tax 4,819.6 8.2%

5. Skills Development Levy 179.2 0.3%

6. Tourism Levy 17.0 0.0%

B. Indirect Taxes 10,147.7 17.2%

1. Local Excise Duties 2,562.0 4.3%

2. Local Excise-Cement 141.3 0.2%

3. Rural Electrification Levy 166.3 0.3%

4. Local Fuel Levy 398.4 0.7%

5. Insurance Premium 106.2 0.2%

6.VAT on domestic goods 6,773.4 11.5%

2. Customs Services Division 18,261.5 30.9%

1. VAT on imports 12,230.7 20.7%

2. GST on Imports 4,182.2 7.1%

3. Customs duty (Import tariffs) 186.4 0.3%

4. Export duties; o/w - 0.0%

Export Duty on Maize - 0.0%

Export Duty on Timber 186.4 0.3%

Export Duty on Minerals and concentrates 1,018.4 1.7%

5. Import Excise Duties 429.3 0.7%

6. Import Fuel Levy 66.4 0.1%

7. Carbon Tax 148.1 0.3%

8.Motor Vehicle Fees 40,776.0 69.1%

Total Revenue; o/w 59,037.5 100.0%

Tax Revenue 58,693.3 99.4%

Non-Tax Revenue 344.3 0.6%

2) Economic performance in 2020 The economic outturn in 2020 has so far been at variance with the initial projections owing to the advent of the COVID-19 pandemic that has resulted in depressed economic activity at both local and international levels.

Inflation in the first half of the year has averaged 14.7% against a projected outturn of 7% at the start of the year. The exchange rate has averaged K16.7 to one US dollar in the first half of 2020 against the budget projected average rate of K13.30 to one US dollar.

Commercial banks average lending rates have further averaged 28.0 percent in the first half of the year compared to 24.6 percent in the first half of 2019.

Copper prices in the first half of the year averaged US$ 5,487.2 per metric tonne against a projected outturn of US$ 6,278.00.

3) Revenue Performance in the first quarter of 2020

During the first quarter of 2020, ZRA collected K16, 092.7 million in gross taxes while the refunds stood at K2, 977.1 million. The net tax take stood at K13, 115.6 million against a target of K13, 051.8 million thereby registering a surplus of K63.7 million or 0.5 percent above target. This performance was largely as a result of favourable outturn in direct taxes.

With respect to domestic taxes, direct taxes as a group were above target by K1, 312.2 million or 18.7 percent, while indirect taxes were K1, 426.8 million or 62.2 percent below their respective first quarter targets of K7, 030.6 million and K2, 294.8 million. All tax types in the direct taxes group, except withholding taxes, recorded above target performances. On the other hand, the performance of most tax types under indirect taxes were below target.

Trade based taxes were K178.3 million or 4.8 percent above the target of K3, 726.5 million.

The positive performance of import VAT, customs duties, export duties, import fuel levy and carbon tax with surpluses of K80.7 million, K31.1 million, K35.8 million, K62.7 million and

K0.7 million respectively, sustained the favourable performance of trade taxes. On the down side, import excise duties and motor vehicle fees were below their quarter targets by 5.5 percent and 52.0 percent respectively (See Table 3 below).

Table 3: Actual Revenue Collection against Revenue Target January - March 2020 (K’ million)

Gross Refunds Actual Target Variance % Var

1. Direct Taxes Division 8,379.9 37.0 8,342.8 7,030.6 1,312.2 18.7%

1. Company tax; o/w 2,251.1 - 2,251.1 1,451.9 799.2 55.0%

Non Mining Company Tax 980.8 - 980.8 812.6 168.2 20.7%

Mining Company Tax 1,270.3 - 1,270.3 639.4 630.9 98.7%

2. PAYE 3,553.2 - 3,553.2 3,018.0 535.2 17.7%

3. Withholding tax & others 1,247.7 37.0 1,210.7 1,343.2 (132.5) -9.9%

4. Mineral royalty tax 1,276.6 - 1,276.6 1,170.5 106.0 9.1%

5. Skills Development Levy 46.6 - 46.6 44.7 1.9 4.3%

6. Tourism Levy 4.6 - 4.6 2.2 2.4 109.2%

2. Indirect Taxes Division 3,753.9 2,886.0 868.0 2,294.8 (1,426.8) -62.2%

1. Local Excise Duties 447.1 - 447.1 485.7 (38.6) -7.9%

2. Local Excise-Cement 16.4 - 16.4 25.9 (9.5) -36.7%

3. Rural Electrification Levy 41.6 - 41.6 45.7 (4.1) -9.0%

4. Local Fuel Levy 80.7 - 80.7 73.8 6.9 9.4%

5. Insurance Premium 30.8 - 30.8 38.7 (8.0) -20.6%

6.VAT on domestic goods 3,137.3 2,886.0 251.4 1,624.9 (1,373.5) -84.5%

3. Customs Services Division 3,958.9 54.1 3,904.8 3,726.5 178.3 4.8%

1. VAT on imports 2,492.5 - 2,492.5 2,411.8 80.7 3.3%

2. Customs duty (Import tariffs) 937.7 54.1 883.5 852.4 31.1 3.7%

3. Export duties; o/w 88.8 - 88.8 53.0 35.8 67.6%

Export Duty on Maize - - - - - 0.0%

Export Duty on Timber - - - - - 0.0%

Export Duty on Concentrates 88.8 - 88.8 53.0 35.8 67.6%

4. Import Excise Duties 228.7 - 228.7 241.9 (13.2) -5.5%

5. Import Fuel Levy 175.1 - 175.1 112.4 62.7 55.8%

6. Carbon Tax 18.1 - 18.1 17.4 0.7 3.9%

7.Motor Vehicle Fees 18.0 - 18.0 37.6 (19.5) -52.0%

Total Revenue; o/w 16,092.7 2,977.1 13,115.6 13,051.8 63.7 0.5%

Tax Revenue 16,023.4 2,977.1 13,046.2 12,967.4 78.9 0.6%

Non-Tax Revenue 69.3 - 69.3 84.5 (15.2) -17.9%

4) Revenue Performance in the Second quarter of 2020

During the second quarter of 2020, ZRA collected K15, 809.2 million in gross taxes while the refunds stood at K2, 618.0 million. The net tax take stood at K13, 191.2 million against a target of K16, 283.1 million thereby registering a deficit of K3, 091.8 million or 19.0 percent below target. This performance was largely a result of the depressed consumption in the economy caused by the COVID-19.

With respect to Inland taxes Divisions, direct taxes as a group were below their target by K634.5 million or 7.2 percent, while indirect taxes were K1, 000.6 million or 39.1 percent below their respective second quarter targets of K8, 816.0 million and K2, 560.7 million. All tax types in the direct taxes group, except mining company tax were below their respective target performances.

On the other hand, the performance of all but rural electrification levy and insurance premium levy under indirect taxes were below target in the second quarter of 2020

Trade based taxes were K1, 456.8 million or 29.7 percent below the period target of K4, 906.3 million. Only import fuel levies were above their second quarter target in the trade taxes group

(See Table 4 below).

Table 4: Actual Revenue Collection against Revenue Target Second quarter (April – June) 2020 (K’ million)

Gross Refunds Actual Target Variance % Var

1. Inland Taxes Division 12,307.3 2,565.7 9,741.7 11,376.7 (1,635.1) -14.4%

A. Direct Taxes Division 8,191.4 9.9 8,181.5 8,816.0 (634.5) -7.2%

1. Company tax; o/w 2,873.5 - 2,873.5 3,039.0 (165.5) -5.4%

Non Mining Company Tax 1,233.5 - 1,233.5 1,438.6 (205.1) -14.3%

Mining Company Tax 1,640.1 - 1,640.1 1,600.4 39.6 2.5%

2. PAYE 3,071.2 - 3,071.2 3,171.8 (100.6) -3.2%

3. Withholding tax & others 1,232.0 9.9 1,222.1 1,316.8 (94.7) -7.2%

4. Mineral royalty tax 973.0 - 973.0 1,239.0 (266.0) -21.5%

5. Skills Development Levy 40.3 - 40.3 45.0 (4.7) -10.6%

6. Tourism Levy 1.4 - 1.4 4.4 (3.0) -67.3%

B. Indirect Taxes Division 4,115.9 2,555.8 1,560.1 2,560.7 (1,000.6) -39.1%

1. Local Excise Duties 428.2 - 428.2 565.0 (136.8) -24.2%

2. Local Excise-Cement 20.0 - 20.0 33.9 (13.9) -40.9%

3. Rural Electrification Levy 72.2 - 72.2 39.6 32.6 82.4%

4. Local Fuel Levy 57.4 - 57.4 100.1 (42.7) -42.7%

5. Insurance Premium 22.3 - 22.3 20.4 1.9 9.2%

6.VAT on domestic goods 3,515.8 2,555.8 960.0 1,801.7 (841.7) -46.7%

3. Customs Services Division 3,501.9 52.3 3,449.6 4,906.3 (1,456.8) -29.7%

1. VAT on imports 2,354.3 - 2,354.3 3,295.1 (940.8) -28.6%

2. Customs duty (Import tariffs) 671.6 52.3 619.2 1,145.5 (526.2) -45.9%

3. Export duties; o/w 13.6 - 13.6 47.5 (33.9) -71.4%

Export Duty on Maize - - - - -

Export Duty on Timber - - - - -

Export Duty on Concentrates 13.6 - 13.6 47.5 (33.9) -71.4%

4. Import Excise Duties 208.3 - 208.3 254.0 (45.7) -18.0%

5. Import Fuel Levy 227.7 - 227.7 114.0 113.8 99.8%

6. Carbon Tax 15.3 - 15.3 16.0 (0.7) -4.7%

7.Motor Vehicle Fees 11.1 - 11.1 34.3 (23.2) -67.7%

Total Revenue; o/w 15,809.2 2,618.0 13,191.2 16,283.1 (3,091.8) -19.0%

Tax Revenue 15,756.4 2,618.0 13,138.4 16,199.4 (3,060.9) -18.9%

Non-Tax Revenue 52.8 - 52.8 83.7 (30.9) -36.9%

5) January - June 2020 Revenue Analysis

During the period under review, ZRA collected K31, 901.9 million in gross taxes while the refunds stood at K5, 595.1 million. The net tax collection was K26, 306.8 million against a target of K29, 334.9 million, thereby registering a deficit of K3, 028.1 million or 10.3 percent below target.

With respect to Inland Tax Divisions, direct tax division’s collections were K677.7 million or

4.3 percent above the year-to-date target of K15, 846.6 million, while Indirect Tax Division’s collections were K2, 427 million or 50 percent below the year-to-date target of K4, 855.4 million. The positive performance in direct taxes is on account of the strong performance in company tax and PAYE with respective surpluses of K633.6 million and K434.6 million.

Under indirect taxes, all tax types with the exception of rural electrification levy recorded a negative performance in the period under review.

Trade-based taxes were K1, 278.5 million or 14.8 percent below the target of K8, 632.8 million. The negative performance of import VAT, customs duty, import excise duties and motor vehicle fees with deficits of K860.1 million, K495.1 million, K58.9 million and K42.7 million respectively, dampened the performance of trade taxes. On the positive side, export duties and import fuel levy were above the year-to-date targets by K1.9 million and K176.5 million, respectively (See Table 5).

Table 5: Actual Revenue Collection against Revenue Target January – June 2020 (K’ million)

Gross Refunds Actual Target Variance % Variance

1.Inland Taxes Divisions 24,441.1 5,488.7 18,952.5 20,702.1 (1,749.6) -8.5%

A. Direct Taxes Division 16,571.3 46.9 16,524.4 15,846.6 677.7 4.3%

1. Company tax; o/w 5,124.6 0.0 5,124.6 4,491.0 633.6 14.1%

Non Mining Company Tax 2,214.3 0.0 2,214.3 2,251.2 (36.9) -1.6%

Mining Company Tax 2,910.3 0.0 2,910.3 2,239.8 670.5 29.9%

2. PAYE 6,624.4 0.0 6,624.4 6,189.8 434.6 7.0%

3. Withholding tax & others 2,479.7 46.9 2,432.8 2,660.0 (227.2) -8.5%

4. Mineral royalty tax 2,249.6 0.0 2,249.6 2,409.5 (159.9) -6.6%

5. Skills Development Levy 86.9 0.0 86.9 89.7 (2.8) -3.1%

6. Tourism Levy 6.1 0.0 6.1 6.6 (0.6) -8.4%

B. Indirect Taxes Division 7,869.8 5,441.7 2,428.1 4,855.4 (2,427.4) -50.0%

1. Local Excise Duties 875.3 0.0 875.3 1,050.7 (175.4) -16.7%

2. Local Excise-Cement 36.4 0.0 36.4 59.8 (23.4) -39.1%

3. Rural Electrification Levy 113.8 0.0 113.8 85.4 28.5 33.4%

4. Local Fuel Levy 138.0 0.0 138.0 173.8 (35.8) -20.6%

5. Insurance Premium 53.1 0.0 53.1 59.2 (6.1) -10.3%

6.VAT on domestic goods 6,653.2 5,441.7 1,211.4 3,426.6 (2,215.2) -64.6%

2. Customs Services Division 7,460.8 106.5 7,354.3 8,632.8 (1,278.5) -14.8%

1. VAT on imports 4,846.7 0.0 4,846.7 5,706.8 (860.1) -15.1%

2. Customs duty (Import tariffs) 1,609.2 106.5 1,502.8 1,997.9 (495.1) -24.8%

3. Export duties; o/w 102.4 0.0 102.4 100.5 1.9 1.8%

Export Duty on Maize 0.0 0.0 0.0 0.0 - 0.0%

Export Duty on Timber 0.0 0.0 0.0 0.0 - 0.0%

Export Duty on Concentrates 102.4 0.0 102.4 100.5 1.9 1.8%

4. Import Excise Duties 437.1 0.0 437.1 495.9 (58.9) -11.9%

5. Import Fuel Levy 402.8 0.0 402.8 226.4 176.5 78.0%

6. Carbon Tax 33.4 0.0 33.4 33.5 (0.1) -0.2%

7.Motor Vehicle Fees 29.1 0.0 29.1 71.8 (42.7) -59.5%

Total Revenue; o/w 31,901.9 5,595.1 26,306.8 29,334.9 (3,028.1) -10.3%

Tax Revenue 31,779.8 5,595.1 26,184.7 29,166.7 (2,982.1) -10.2%

Non-Tax Revenue 122.1 0.0 122.1 168.2 (46.1) -27.4%

a) January - June 2020 Vs. January - June 2019

In the period January – June 2020, the Authority’s gross collections were 1.2 percent lower than that recorded in the same period in 2019. This was mainly due to a fall in consumption-based taxes, which were 15.3 percent lower in 2020 relative to 2019. On a net basis, the

Authority collected 4.8 percent lower in 2020 compared to 2019 owing to a 48.3 percent decline in net collections for indirect taxes and domestic VAT in particular (64.5%). The net performance in nominal terms during January to June 2020 was lower for most tax types when compared to the same period in 2019 (see table 6).

Table 6: January - June 2020 Collections against January - June 2019 Collections, K’ Millions

Jan – June Gross collections Jan – June Net Collections

2020 2019 Var% 2020 2019 Var%

1. Inland Taxes 24,441.1 24,494.2 -0.2% 18,952.5 19,861.2 -4.6%

A. Direct Taxes Division 16,571.3 15,205.2 9.0% 16,524.4 15,163.9 9.0%

1. Company tax; o/w 5,124.6 4,253.6 20.5% 5,124.6 4,253.6 20.5%

Non Mining Company Tax 2,214.3 2,326.3 -4.8% 2,214.3 2,326.3 -4.8%

Mining Company Tax 2,910.3 1,927.3 51.0% 2,910.3 1,927.3 51.0%

2. PAYE 6,624.4 6,078.7 9.0% 6,624.4 6,075.2 9.0%

3. Withholding tax & others 2,479.7 2,451.1 1.2% 2,432.8 2,413.4 0.8%

4. Mineral royalty tax 2,249.6 2,322.6 -3.1% 2,249.6 2,322.6 -3.1%

5. Skills Development Levy 86.9 90.9 -4.4% 86.9 90.9 -4.4%

6. Tourism Levy 6.1 8.3 -27.1% 6.1 8.3 -27.1%

B. Indirect Taxes Division 7,869.8 9,289.0 -15.3% 2,428.1 4,697.3 -48.3%

1. Local Excise Duties 875.3 906.0 -3.4% 875.3 906.0 -3.4%

2. Local Excise-Cement 36.4 48.4 -24.8% 36.4 48.4 -24.8%

3. Rural Electrification Levy 113.8 67.4 68.8% 113.8 67.4 68.8%

4. Local Fuel Levy 138.0 216.0 -36.1% 138.0 216.0 -36.1%

5. Insurance Premium 53.1 51.4 3.3% 53.1 51.4 3.3%

6.VAT on domestic goods 6,653.2 7,999.7 -16.8% 1,211.4 3,407.9 -64.5%

2. Customs Services Division 7,460.8 7,779.2 -4.1% 7,354.3 7,760.1 -5.2%

1. VAT on imports 4,846.7 5,327.1 -9.0% 4,846.7 5,327.1 -9.0%

2. Customs duty (Import tariffs) 1,609.2 1,665.8 -3.4% 1,502.8 1,646.7 -8.7%

3. Export duties; o/w 102.4 91.5 11.9% 102.4 91.5 11.9%

Export Duty on Maize - -

0.0 0.0

Export Duty on Timber - -

0.0 0.0

Export Duty on Concentrates 102.4 91.5 11.9% 102.4 91.5 11.9%

4. Import Excise Duties 437.1 368.2 18.7% 437.1 368.2 18.7%

5. Import Fuel Levy 402.8 256.0 57.4% 402.8 256.0 57.4%

6. Carbon Tax 33.4 30.3 10.1% 33.4 30.3 10.1%

7.Motor Vehicle Fees 29.1 40.3 -27.7% 29.1 40.3 -27.7%

Total Revenue; o/w 31,901.9 32,273.4 -1.2% 26,306.8 27,621.3 -4.8%

Tax Revenue 31,779.8 32,133.9 -1.1% 26,184.7 27,481.7 -4.7%

Non-Tax Revenue 122.1 139.5 -12.5% 122.1 139.5 -12.5%

6) Revenue contribution by Sector: January – June 2020 vs. January – June 2019

Compared to 2019 gross inland collections recorded a marginal increase of 0.7 percent in the period January – June 2020. The sectors that recorded more collections in 2020 compared to 2019 in the same period were notably; Public administration and defence, Electricity, gas, steam and air conditioning supply, Information and communication, Financial and insurance activities, unclassified/individuals, education and human health and social work activities. On the other hand, some sectors contributed less revenue in 2020 compared to the same period in

2019. These include: Mining and quarrying, Wholesale and retail trade, manufacturing, transportation and storage, construction, accommodation and food services activities, Arts, entertainment and recreation, Water supply; sewerage, waste, Agriculture, forestry and fishing (see Table 7)

Table 7 January - June 2020 vs January - June 2019 Gross Collections by Sector, K ’Million

Sector Inland Tax Collections Customs Tax Collections Total Tax Collections

2020 2019 % Var 2020 2019 % Var 2020 2019 % Var

Mining and quarrying 10,917.4 10,396.8 5.0% 1,004.1 1,794.3 -44.0% 11,921.5 12,191.1 -2.2%

Wholesale and retail trade; repair of motor vehicles and motorcycles 2,280.3 2,695.3 -15.4% 3,217.4 2,808.6 14.6% 5,497.7 5,503.9 -0.1%

Manufacturing 1,774.8 1,864.4 -4.8% 1,097.8 1,151.1 -4.6% 2,872.6 3,015.5 -4.7%

Financial and insurance activities 2,098.4 2,007.1 4.5% 31.0 30.8 0.8% 2,129.4 2,037.9 4.5%

Public administration and defence; compulsory social security 1,781.3 1,401.9 27.1% 1.3 2.1 -39.4% 1,782.5 1,403.9 27.0%

Administrative and support service activities 1,090.1 1,063.7 2.5% 106.6 144.2 -26.1% 1,196.7 1,207.9 -0.9%

Information and communication 1,023.4 861.5 18.8% 95.5 97.2 -1.8% 1,118.8 958.8 16.7%

Other service activities 748.8 590.3 26.8% 212.5 279.4 -24.0% 961.2 869.7 10.5%

Electricity, gas, steam and air conditioning supply 817.2 643.6 27.0% 53.3 82.1 -35.1% 870.5 725.7 19.9%

Transportation and storage 348.0 351.4 -1.0% 461.9 662.1 -30.2% 809.9 1,013.5 -20.1%

Professional, scientific and technical activities 572.3 518.2 10.4% 181.0 175.1 3.3% 753.3 693.3 8.7%

Education 699.2 612.2 14.2% 5.5 8.5 -35.4% 704.7 620.7 13.5%

Construction 406.8 661.9 -38.5% 220.6 180.3 22.3% 627.4 842.3 -25.5%

Unclassified/Individuals 202.0 131.6 53.5% 284.1 228.0 24.6% 486.0 359.6 35.2%

Agriculture, forestry and fishing 342.9 327.3 4.8% 93.5 131.3 -28.8% 436.4 458.6 -4.8%

Accommodation and food service activities 131.5 165.5 -20.5% 22.2 20.4 9.0% 153.7 185.9 -17.3%

Human health and social work activities 119.8 99.7 20.1% 4.4 3.9 12.9% 124.2 103.6 19.9%

Real estate activities 94.3 102.0 -7.6% 15.1 16.4 -8.2% 109.3 118.4 -7.7%

Arts, entertainment and recreation 38.0 49.5 -23.2% 1.3 3.8 -66.0% 39.3 53.3 -26.2%

Water supply; sewerage, waste management and remediation activities 25.3 36.6 -31.0% 1.1 3.3 -66.7% 26.4 39.9 -33.9%

Activities of extraterritorial organizations and bodies 10.6 9.7 9.6% 1.7 1.4 20.5% 12.3 11.1 11.0%

Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use

0.1 0.1 74.8% 0.0 0.0 -83.6% 0.2 0.1 25.4%

Grand Total 25,522.5 24,590.4 3.8% 7,111.7 7,824.4 -9.1% 32,634.1 32,414.8 0.7%

Mining and Non-Mining Sector Performance: January - June 2020 vs. January - June 2019

Comparatively, the mining & quarrying sector recorded a 5.0 percent growth in gross inland collections and a 44.0 percent reduction in corresponding trade taxes collections over the review period. This implies that the overall collections increased marginally by 2.2 percent from the sector. Conversely, the non-mining sector recorded a marginal 2.9 percent and a 1.3 percent increase in inland and trade taxes respectively thereby registering a 2.4 percent surplus over the

2019 January to June collections. The mining sector comparably continued to record reduced economic activities during the first half of the year (see table 8)

Table 8 Gross Sector Collections: January - June 2020 vs January - June 2019 Collections, K ’Millions

Inland Tax Collections Customs Tax Collections Total Tax Collections

2020 2019 % Var 2020 2019 % Var 2020 2019 % Var

Mining & quarrying 10,917.4 10,396.8 5.0% 1,004.1 1,794.3 -44.0% 11,921.5 12,191.1 -2.2%

Non - Mining 14,605.1 14,193.7 2.9% 6,107.6 6,030.1 1.3% 20,712.7 20,223.7 2.4%

Total 25,522.5 24,590.4 3.8% 7,111.7 7,824.4 -9.1% 32,634.1 32,414.8 0.7%

Mining Sector Performance: January – June 2020 vs. January – June 2019

An analysis of the top eighteen (18) mining sector players’ tax payments between 2019 and 2020 shows that overall inland tax payments increased by 3.1 percent in 2020 relative to the 2019 position. During this period, the top mining players however, recorded declined contributions in

April through June 2020. On the other hand, there was a 47.4% decline in the top mining company’s revenue contribution from trade taxes between January – June 2020 relative to the same period in 2019. The top mining companies have been recording lower trade tax payments in 2020 compared to 2019 in all the months of the first half of 2020 (See Table 9).

Table 9: Top Mining Company’s January - June 2020 vs January - June 2019 Collections

Inland Tax Collections Customs Tax Collections Total Tax Collections

2020 2019 % Var 2020 2019 % Var 2020 2019 % Var

Jan 2,217.4 1,962.5 13.0% 124.4 250.6 -50.4% 2,341.8 2,213.1 5.8%

Feb 1,807.6 1,381.9 30.8% 121.5 178.8 -32.1% 1,929.1 1,560.7 23.6%

Mar 1,156.8 659.3 75.5% 161.4 216.2 -25.3% 1,318.2 875.5 50.6%

Apr 1,461.7 1,690.1 -13.5% 95.1 321.2 -70.4% 1,556.7 2,011.3 -22.6%

May 1,040.7 1,514.5 -31.3% 185.9 421.2 -55.9% 1,226.7 1,935.7 -36.6%

Jun 1,980.2 2,161.3 -8.4% 191.8 286.2 -33.0% 2,172.0 2,447.4 -11.3%

Jan to Jun 9,664.4 9,369.6 3.1% 880.1 1,674.1 -47.4% 10,544.5 11,043.7 -4.5%

7) Factors Attributed to Revenue Outturn in January to June 2020

The factors that led to the performance of each tax type during the year-to-date period are outlined in Table 10

Table 10: Drivers of Revenue Performance in January to June 2020

A. OVERPERFORMANCE

Tax type Reason

Total Variance from Target

(K' Million)

1. Company Tax – Mining

The overall year to date performance for mining company tax has remained positive due to increased payments from mining companies. Payments from major mining companies have been higher in 2020 than in 2019.

Company tax has further been boosted by higher than anticipated the payments of balance of taxes amounting particularly in the second quarter of 2020.

670.5

2. PAYE

The year to date performance was enhanced by high payment compliance particularly in the first quarter.

Payments of PAYE arrears from the Government and some key parastatals buoyed the collections of the tax type.

Notwithstanding the positive year to date performance in

PAYE, collections in some months in the period under review have been below their respective targets owing to cash flow challenges forcing taxpayers to request for

VAT refund offsets.

434.6

3. Import Fuel Levy

The positive performance is attributable to the high volumes of uplifts of fuel that was imported in its finished form and importations by some Oil Marketing companies

176.5

4. Export duty

The year to date positive performance is mainly attributable to surpluses in January and February on account of the payment of debt by some mining companies mounting to K14.0 million and enhanced debt enforcement collection of K26.1 million at Kenneth

Kaunda International Airport.

However, post March 2020, the tax type has posited negative variances against target mainly due to the waiver of export duty on minerals, a measure introduced to provide relief to taxpayers in response to the effects of the

COVID-19 pandemic

1.9

5. Rural Electrification Levy

The year to date collections for the levy have been positive owing mainly to the increase in the electricity tariffs.

28.5

Sub-Total for over Performance

1, 312.0

B. UNDERPERFORMANCE

Tax type Reason

Total Variance from Target (K

‘Million)

6. Domestic VAT

The deficit in domestic VAT is largely attributable to the challenges faced by taxpayers in filing their returns on the new TaxOnline particularly in the first quarter of the year.

Further, the COVID-19 pandemic has negatively affected most business and consequently VAT collections have reduced.

(2,215.2)

Additionally, Withholding VAT agents have not been remitting, as they should. In June 2020, the appointed agents citing cash flow challenges only paid 27 percent of withheld VAT.

Taxpayers have thus been applying for offsets as well as formalizing Time-to-pay Agreements as a way of mitigating their cash flow challenges.

7. Import VAT

The negative performance in this tax type was mainly attributable to the decrease in the taxable value of imports by 10.2 percent from K30, 914.6 million in January-June

2019 to K27, 760.4 million in the same period in 2020.

Furthermore, there was further a 39.2 percent increase in

VAT waived in June 2020 relative to June 2019 mainly attributed to remission of taxes on goods imported taxpayers named in named in the various Statutory

Instruments issued in 2020

(860.1)

8. Withholding taxes

The underperformance was mainly because of a reduction in collections of withholding tax on dividends, royalties and commissions.

(227.2)

9. Customs duty

The negative year to date performance of customs duty is mainly due to the decrease in the taxable value from K11,

281.3 million in 2019 to K8, 592.5 million in 2020, a reduction of 23.8 percent.

Furthermore, the total customs duty waived in June 2020 increased by K238.5 million or 42% from a total of

K568.2 million waived in June 2019 mainly attributed to the waiver of duty on imported fuel introduced in 2020 totalling K216.2 million.

(495.1)

10. Local Excise Duty

The local excise duty underperformed largely on account of the following factors;

1. Failure to make payment by some taxpayers

2. There has been a drastic drop in the fuel pump overs from INDENI to TAZAMA that has affected the collection of local excise. For the period 11th to 20th

June 2020 there were no local uplifts as INDENI had shut down for routine maintenance and there has been no feedstock after completion of maintenance works. Furthermore, the continued importation of finished petroleum products by OMCs under the expired Statutory Instrument No. 87 of 2019 has also adversely contributed to the negative impact of the observed local fuel uplifts when TAZAMA had the feedstock.

b. Reduced contribution by Excise Manufacturers in response to government guidance on COVID 19 that has affected production and consumption of excisable products. The consumption levels in opaque beer, clear beer, non-alcoholic beverages, and plastic carrier bags sectors have continued to reduce with

Opaque beer being the worst hit as more companies continue to scale down on their production capacity.

(175.4)

3. Project Implementation Delay: The delay in implementing the Digital Tax Stamp (DTS) and

Telecommunication Traffic Monitoring System

(TTMS) has negatively impacted on the net collection of excise duty as the projected revenue has not been realised

11. Mineral royalty tax

The underperformance in mineral royalty is partly due to a reduction in copper prices from $6, 058.4 per tonne in the period January – June 2019 to $5, 487.3 per tonne in the period January – June 2020 translating into a 9.43 percent drop. Further, collections in the review period were negatively affected by non-payment by companies that requested to settle their liabilities through VAT refund offsets.

(159.9)

12. Import Excise Duty

In addition to the effects of the COVID-19 pandemic, the poor performance in import excise was attributed partly to waiver of excise duty under various concessions. Some of the concessions include the suspension of excise duty on importation of tobacco cut rags, goods for developmental projects, importations by public benefit organisations and importations of vehicles by new residents which amounted to K64.6 million in June 2020

(58.9)

13. Motor Vehicle Fees

The negative performance in collections from motor vehicle fees is partly due to a reduction in imported motor vehicles, which was due to factors such as the continued depreciation of the Kwacha against major currencies. The average K/US$ increased to K16.7/US$ in Jan-June 2020 from K12.4/US$ in the same period last year.

(42.7)

14. Company Tax - Non Mining

The performance of this tax type in the period January –

June 2020 was sustained by the strong positive performance recorded in January leading to a positive variance of K189.3 million against the month’s target.

However, by June 2020, the cumulative performance turned negative owing to the non-payment of 2019 balance of Tax by some taxpayers.

(36.9)

15. Local Fuel Levy

Local excise underperformed due to a reduction in fuel pump overs from INDENI (a petroleum refining company) to TAZAMA (a transporter of petroleum from

Tanzania to Zambia through pipelines). It is worth noting that Oil Marketing Companies (OMCs) have continued to import finished petroleum products despite the expiry of

Statutory Instrument No 87 of 2019 that granted waiver to

OMCs to import finished petroleum products following administrative waivers from the Ministry of Energy for importation of fuels.

(35.8)

16. Insurance Premium

The performance of this levy has been impacted by a reduction in the tax base of 20.4 percent from 2019 level owing to a decline in the consumption of insurance products.

(6.1)

17. Other tax types (Local excise – cement, Tourism Levy, Carbon tax

& SDL)

Miscellaneous (26.8)

Sub-Total for Underperformance (4,340.1)

Total Variance (3,028.1)