The long arm of the Tax Man


The Zimbabwe Revenue authority (ZIMRA) recently published its revenue performance report indicating that revenues for the Third Quarter of 2019 exceeded the set target on both gross and net positions. Gross collections for the Third Quarter of 2019 were $6.59 billion against the targeted $6.00 billion, thereby surpassing the third revised set target by 26.55%. Individual Tax, Company Tax, VAT on Imports, Customs Duty, Excise Duty, DFIR, Withholding Tax on Contracts and Tobacco Levy surpassed set targets for the period under review.

Piggy has noted with concern that Zimbabwe has one of the highest personal income tax rates in the world (highest bracket at 40%). This is because the government is cash-strapped and revenues from the Personal Income Tax Rate are an important source of income.  Other taxes such as Excise Duty on Fuel and the Intermediary Money Transfer Tax (IMTT) have also negatively impacted household incomes.  All in all, this has also constrained consumer demand as well as the ability to save money. Most household have seen a contraction in purchasing power and are unable to build assets.

This is a major concern for Piggy because the government is intensifying its efforts to collect more taxes from citizens while doing little to promote a savings culture within the general populace. In South Africa, the National Treasury has taken several steps to promote a savings culture. One of the major developments was the introduction of the Tax-Free Savings Account (TFSA) that was made available for individuals as from 1 March 2015.

Tax Free Savings

The main difference between tax-free accounts and a normal endowment is that although the proceeds from a normal endowment are paid tax-free to the investor, the underlying fund in the endowment is taxed. With the tax-free savings account, the underlying funds are not taxed at all and neither are the proceeds, and this makes the product completely “tax-free”. Tax-free Savings are an ideal vehicle for building discretionary wealth, be it for a specific goal; education funds, holidays or even supplementing retirement capital.

Monetary authorities in Zimbabwe should emulate such initiatives so as to promote an investing and savings culture in Zimbabwe. Below are some tips on the need to prioritize investing.

According to the Bankers Association of Zimbabwe, Zimbabwe’s savings rate as a percentage of GDP is estimated at 10% which shows that there is a low savings culture in the country. Piggy primarily focuses on financial literacy and also creates informational and educational content for individuals, households and institutions.

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