An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015

Bongani Ngwenya; Thando Siziba

doi:doi:10.11648/j.ebm.20160202.13

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An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015

Bongani Ngwenya, Thando Siziba

Published in European Business & Management (Volume 2, Issue 2)

Received: 5 September 2016 Accepted: 20 October 2016 Published: 12 December 2016

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Abstract

Zimbabwe solely depends on revenue targets formulated by the Ministry of Finance and Economic Development for the measurement of performance of the Zimbabwe Revenue Authority. The trend for this development is to rely on estimating the tax gap which is the difference between potential and actual collections. The study employed a quantitative research design and analysis of the major causes of reduction in tax revenue resulting especially from the envisaged high tax rates in Zimbabwe. A sample of 300 was targeted by the researchers from a population of 1700. This was stratified to 220 formally employed and 80 informally employed based on the ratio of 73% of gainfully employed in the formal sector. The findings of the study revel that the Zimbabwe Revenue Authority is not facing as much of a challenge when considering the overall effect of each of the four identified factors, that is, tax avoidance and evasion; corruption by employees of the revenue authority; inefficient and ineffective tax administration, and increased informal employment. However, regression analysis revealed that the most significant factor that weighs down tax revenue collectability is the continuous fall in the formal employment, as more workers lose their jobs and join the informal sector. The factor accounted for 25.7% of the total variance and the effect on revenue collectability was calculated at p-value =.001 which is less than 0.05. While individuals in the informal sector of the economy of Zimbabwe may actually be making more money than those formally employed there might be a lack of a system to allow for collection of taxes in the growing informal sector. The study recommends that the Zimbabwe Revenue Authority increases its efforts towards widening the tax base by designing a tax regime that will help the fiscus to tape into the informal sector`s economic activity in the country. This may be achieved through co-operation with financial sector institutions such as banks as they embark on an effort to deal with the challenge of financial exclusion in the economy. For example, as the banking sector considers offering financing packages to the informal sector, formalisation of the sector should be insisted as a condition for potential funding.

Published in	European Business & Management (Volume 2, Issue 2)
DOI	10.11648/j.ebm.20160202.13
Page(s)	32-39
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Tax Regime, Informal Sector, Tax Revenue Collectability, Zimbabwe Revenue Authority

References

[1]	AFRODAD. (2011). What has Tax got to do with Development? A Critical look at Zimbabwe' Tax System. Africa Forum and Network on Debt and Development.
[2]	Alm, J., & Duncan, D. (2013). Estimating Tax Agency Efficiency. Coumbia Law School.
[3]	Azevedo, R. A. (2010). Tax Avoidance and Tax Evasion: A Comparative Study of the Brazilian and the American Legal Systems. The George Washington University: The Institute of Brazilian Business and Public Management Issues.
[4]	Christensen, J. (2012). Africa's Lost Tax Revenue, Lost Development Opportunities. Association of Concerned Africa Scholars.
[5]	Dohrmann, T., & Pinshaw, G. (2009). The Road to Improved Compliance. McKinsey and Company.
[6]	Federal Budget in Pictures. (2015). Retrieved from http://www.heritage.org/federalbudget/corporate-tax-rate
[7]	Freire-Seren, M. J., & Panades, J. (2013). Do higher Taxes Encourage/ Discourage Tax Compliance Modern Economy.
[8]	Hayford, M. D. (2007). Using Supply, Demand and Cournot Model to Understand Corruption. Journal on Economic Education Volume 3 (2), 38-45.
[9]	Hove, N. (2012). An Investigation on Effective Strategies to Curb Tax Evasion: A survey of Beitbridge ZIMRA Staff and Clients, Zimbabwe. Elite Research Journal of Accounting and Business Management Volume 1 (1), 1-9.
[10]	KPMG Global. (2014). KPMG Tax Tools. Retrieved from http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx
[11]	Martini, M. (2014). Approaches to Curbing Corruption in Tax Administration in Africa. Transparency International.
[12]	Mascagni, G., Moore, M., & McCluskey, R. (2014). Tax Revenue Mobilisation in Developing Countries: Issues and Challenges. Brussels: European Union, Directorate-General for External Policies of the Union.
[13]	Ndedzu, D., Macheka, A., Ithiel, N. M., & Zivengwa, T. (2013). Revenue Productivity of Zimbabwe's Tax System. Asian Journal of Social Sciences & Humanities Vol 2 Number 4.
[14]	Sarr, B. (2013). Assessing Revenue Authority Performance in Developing Countries: A Synthetic Control Approach. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2512577
[15]	ZEPARU. (2014). Harnessing Resources from the Informal Sector for Economic Development. BAZ Newsletter.
[16]	Zimbabwe Revenue Authority. (2015). ZIMRA. Retrieved from http://www.zimra.co.zw/index.php?option=com_content&view=article&id=1245&Itemid=209

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Bongani Ngwenya, Thando Siziba. (2016). An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015. European Business & Management, 2(2), 32-39. https://doi.org/10.11648/j.ebm.20160202.13

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Bongani Ngwenya; Thando Siziba. An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015. Eur. Bus. Manag. 2016, 2(2), 32-39. doi: 10.11648/j.ebm.20160202.13

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Bongani Ngwenya, Thando Siziba. An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015. Eur Bus Manag. 2016;2(2):32-39. doi: 10.11648/j.ebm.20160202.13

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@article{10.11648/j.ebm.20160202.13,
  author = {Bongani Ngwenya and Thando Siziba},
  title = {An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015},
  journal = {European Business & Management},
  volume = {2},
  number = {2},
  pages = {32-39},
  doi = {10.11648/j.ebm.20160202.13},
  url = {https://doi.org/10.11648/j.ebm.20160202.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ebm.20160202.13},
  abstract = {Zimbabwe solely depends on revenue targets formulated by the Ministry of Finance and Economic Development for the measurement of performance of the Zimbabwe Revenue Authority. The trend for this development is to rely on estimating the tax gap which is the difference between potential and actual collections. The study employed a quantitative research design and analysis of the major causes of reduction in tax revenue resulting especially from the envisaged high tax rates in Zimbabwe. A sample of 300 was targeted by the researchers from a population of 1700. This was stratified to 220 formally employed and 80 informally employed based on the ratio of 73% of gainfully employed in the formal sector. The findings of the study revel that the Zimbabwe Revenue Authority is not facing as much of a challenge when considering the overall effect of each of the four identified factors, that is, tax avoidance and evasion; corruption by employees of the revenue authority; inefficient and ineffective tax administration, and increased informal employment. However, regression analysis revealed that the most significant factor that weighs down tax revenue collectability is the continuous fall in the formal employment, as more workers lose their jobs and join the informal sector. The factor accounted for 25.7% of the total variance and the effect on revenue collectability was calculated at p-value =.001 which is less than 0.05. While individuals in the informal sector of the economy of Zimbabwe may actually be making more money than those formally employed there might be a lack of a system to allow for collection of taxes in the growing informal sector. The study recommends that the Zimbabwe Revenue Authority increases its efforts towards widening the tax base by designing a tax regime that will help the fiscus to tape into the informal sector`s economic activity in the country. This may be achieved through co-operation with financial sector institutions such as banks as they embark on an effort to deal with the challenge of financial exclusion in the economy. For example, as the banking sector considers offering financing packages to the informal sector, formalisation of the sector should be insisted as a condition for potential funding.},
 year = {2016}
}

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T1  - An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015
AU  - Bongani Ngwenya
AU  - Thando Siziba
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JO  - European Business & Management
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PB  - Science Publishing Group
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AB  - Zimbabwe solely depends on revenue targets formulated by the Ministry of Finance and Economic Development for the measurement of performance of the Zimbabwe Revenue Authority. The trend for this development is to rely on estimating the tax gap which is the difference between potential and actual collections. The study employed a quantitative research design and analysis of the major causes of reduction in tax revenue resulting especially from the envisaged high tax rates in Zimbabwe. A sample of 300 was targeted by the researchers from a population of 1700. This was stratified to 220 formally employed and 80 informally employed based on the ratio of 73% of gainfully employed in the formal sector. The findings of the study revel that the Zimbabwe Revenue Authority is not facing as much of a challenge when considering the overall effect of each of the four identified factors, that is, tax avoidance and evasion; corruption by employees of the revenue authority; inefficient and ineffective tax administration, and increased informal employment. However, regression analysis revealed that the most significant factor that weighs down tax revenue collectability is the continuous fall in the formal employment, as more workers lose their jobs and join the informal sector. The factor accounted for 25.7% of the total variance and the effect on revenue collectability was calculated at p-value =.001 which is less than 0.05. While individuals in the informal sector of the economy of Zimbabwe may actually be making more money than those formally employed there might be a lack of a system to allow for collection of taxes in the growing informal sector. The study recommends that the Zimbabwe Revenue Authority increases its efforts towards widening the tax base by designing a tax regime that will help the fiscus to tape into the informal sector`s economic activity in the country. This may be achieved through co-operation with financial sector institutions such as banks as they embark on an effort to deal with the challenge of financial exclusion in the economy. For example, as the banking sector considers offering financing packages to the informal sector, formalisation of the sector should be insisted as a condition for potential funding.
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Author Information

Bongani Ngwenya

Department of Postgraduate Studies, Faculty of Business, Solusi University, Bulawayo, Zimbabwe
Thando Siziba

Department of Postgraduate Studies, Faculty of Business, Solusi University, Bulawayo, Zimbabwe

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Bongani Ngwenya, Thando Siziba. (2016). An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015. European Business & Management, 2(2), 32-39. https://doi.org/10.11648/j.ebm.20160202.13

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ACS Style

Bongani Ngwenya; Thando Siziba. An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015. Eur. Bus. Manag. 2016, 2(2), 32-39. doi: 10.11648/j.ebm.20160202.13

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AMA Style

Bongani Ngwenya, Thando Siziba. An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015. Eur Bus Manag. 2016;2(2):32-39. doi: 10.11648/j.ebm.20160202.13

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@article{10.11648/j.ebm.20160202.13,
  author = {Bongani Ngwenya and Thando Siziba},
  title = {An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015},
  journal = {European Business & Management},
  volume = {2},
  number = {2},
  pages = {32-39},
  doi = {10.11648/j.ebm.20160202.13},
  url = {https://doi.org/10.11648/j.ebm.20160202.13},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ebm.20160202.13},
  abstract = {Zimbabwe solely depends on revenue targets formulated by the Ministry of Finance and Economic Development for the measurement of performance of the Zimbabwe Revenue Authority. The trend for this development is to rely on estimating the tax gap which is the difference between potential and actual collections. The study employed a quantitative research design and analysis of the major causes of reduction in tax revenue resulting especially from the envisaged high tax rates in Zimbabwe. A sample of 300 was targeted by the researchers from a population of 1700. This was stratified to 220 formally employed and 80 informally employed based on the ratio of 73% of gainfully employed in the formal sector. The findings of the study revel that the Zimbabwe Revenue Authority is not facing as much of a challenge when considering the overall effect of each of the four identified factors, that is, tax avoidance and evasion; corruption by employees of the revenue authority; inefficient and ineffective tax administration, and increased informal employment. However, regression analysis revealed that the most significant factor that weighs down tax revenue collectability is the continuous fall in the formal employment, as more workers lose their jobs and join the informal sector. The factor accounted for 25.7% of the total variance and the effect on revenue collectability was calculated at p-value =.001 which is less than 0.05. While individuals in the informal sector of the economy of Zimbabwe may actually be making more money than those formally employed there might be a lack of a system to allow for collection of taxes in the growing informal sector. The study recommends that the Zimbabwe Revenue Authority increases its efforts towards widening the tax base by designing a tax regime that will help the fiscus to tape into the informal sector`s economic activity in the country. This may be achieved through co-operation with financial sector institutions such as banks as they embark on an effort to deal with the challenge of financial exclusion in the economy. For example, as the banking sector considers offering financing packages to the informal sector, formalisation of the sector should be insisted as a condition for potential funding.},
 year = {2016}
}

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TY  - JOUR
T1  - An Analysis of the Factors that Have Reduced Tax Revenue Collectability in Zimbabwe Between 2009 and 2015
AU  - Bongani Ngwenya
AU  - Thando Siziba
Y1  - 2016/12/12
PY  - 2016
N1  - https://doi.org/10.11648/j.ebm.20160202.13
DO  - 10.11648/j.ebm.20160202.13
T2  - European Business & Management
JF  - European Business & Management
JO  - European Business & Management
SP  - 32
EP  - 39
PB  - Science Publishing Group
SN  - 2575-5811
UR  - https://doi.org/10.11648/j.ebm.20160202.13
AB  - Zimbabwe solely depends on revenue targets formulated by the Ministry of Finance and Economic Development for the measurement of performance of the Zimbabwe Revenue Authority. The trend for this development is to rely on estimating the tax gap which is the difference between potential and actual collections. The study employed a quantitative research design and analysis of the major causes of reduction in tax revenue resulting especially from the envisaged high tax rates in Zimbabwe. A sample of 300 was targeted by the researchers from a population of 1700. This was stratified to 220 formally employed and 80 informally employed based on the ratio of 73% of gainfully employed in the formal sector. The findings of the study revel that the Zimbabwe Revenue Authority is not facing as much of a challenge when considering the overall effect of each of the four identified factors, that is, tax avoidance and evasion; corruption by employees of the revenue authority; inefficient and ineffective tax administration, and increased informal employment. However, regression analysis revealed that the most significant factor that weighs down tax revenue collectability is the continuous fall in the formal employment, as more workers lose their jobs and join the informal sector. The factor accounted for 25.7% of the total variance and the effect on revenue collectability was calculated at p-value =.001 which is less than 0.05. While individuals in the informal sector of the economy of Zimbabwe may actually be making more money than those formally employed there might be a lack of a system to allow for collection of taxes in the growing informal sector. The study recommends that the Zimbabwe Revenue Authority increases its efforts towards widening the tax base by designing a tax regime that will help the fiscus to tape into the informal sector`s economic activity in the country. This may be achieved through co-operation with financial sector institutions such as banks as they embark on an effort to deal with the challenge of financial exclusion in the economy. For example, as the banking sector considers offering financing packages to the informal sector, formalisation of the sector should be insisted as a condition for potential funding.
VL  - 2
IS  - 2
ER  -

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