Using the current tax legislation what are the loopholes for government to collect more

revenue.
According to the business dictionary (2016) tax is a compulsory monetary contribution to the
state's revenue, assessed and imposed by a government on the activities, enjoyment, expenditure,
income, occupation, privilege and property of individuals and organizations. Tax legislation is a
prosed tax law that is put on as a law or when a tax law has been modified. The government has
many revenues sources at which they earn revenue from. The revenue is that can be used for
finance their spending. Taylor(1994) stated that government generates it income from sources
like tax, fees, licenses, duties, tariffs, sale of public goods only to mention a few. This sources of
revenue are governed by tax legislation that are imposed by the legislature of the country. These
sources are posed to loopholes that make it difficult for the government to collect more revenue.
These loopholes include lack of auditing material, tax evasion, gold smuggling only to mention a
few.
To start with the sales tax as a current tax legislation, sales taxes are used to generate revenue for
the government. Merritt (2017)stated that sales tax is charged on final sale price of products and
also that they are paid by the consumer at the time of purchase and the entity that sells is the one
passes the tax to the government. The uses of small and mini business reduces the sales tax that
is collected the government as revenue. For instance sales made at a tuck shop are for the general
benefit of the entrepreneur there is no tax that is paid to the government therefore imposing a
loophole of losing more revenue due to small business such as tuck shops. Also there are some
businesses that use the online platform that do not have a physical location in Zimbabwe.
Therefore some businesses are having sales in Zimbabwe while they are not taxed resulting in
reduction in the government revenue.
Furthermore, looking at weak auditing systems that the government used as a loophole of
collecting more revenue. Weak audit systems led to corruption in the economy. This was because
the government was unable trace all funds that were collected. Some officers would take the
revenue generated and use it for their own benefits. For instance at the introduction of tollgates
,it was possible to channel toll money in their pockets since there was no detecting machines on
how many cars had passed by. This reduced the government revenue since not all funds reached
them.
Commencing on, custom duty as a tax law that is place currently. Custom duty are taxes that are
levied on imported goods. AFRODAD (2011) stated that the tax is accessed on the basis of
weight of goods, year of production and nature of goods. The tax is charged when the goods are
bought in the country through boarder points. This however has a loophole that some goods are
not taxed due to corrupt people who can make dealings that the goods can enter without
everyone paying for his goods custom duty. There can also be under declaration of goods and
also there can be under invoicing of goods at boarder post in which it turns in paying less custom
duty therefore reducing the revenue that can be collected from imported goods.
The government is also facing low revenue generation through the mining sector. The
government imposed a mineral royalty that is charged on the gross fair market value of the
mineral as a percentage but not as in quantity terms. Income Tax is charged in accordance with
 the Income Tax Act (Chapter 23:06), Section 15(2) f. Income tax on mining operations is levied
at 15% for Special Mining Lease Holders and 25% for other mining title holders. Miners are
supposed to be licensed so that the can be able carry out mining procedures Due to the higher
percentages being charged in mining lease holding some miners are now dodging mining
licenses and a are now practicing gold panning. Gold panning is the the illegal mining of
minerals. Some miners are now using unregister gold claims to access to the minerals. This gives
rise to low revenue being generated for the government due to unregistered mineral miners. Gold
panning also decreases the value of minerals that could be mined by licensed miners which also
decreases the revenue for the government.

To add on the loopholes that give rise to low government revenue, there is that that are caused by
the capitals gain tax. Capital gains tax is a capital gain that is raised from specified property.
Specified property implies that the property is immovable like buildings and also any markable
debentures or share. The tax is taxed on different rates of the income. However due to shortage
of cash and the worsening economic in Zimbabwe people are unable to purchase more of
immovable property. This results or leads to the reduction of revenue for the government.

Commencing to, value added tax as a legislation that governs the generation of revenue for the
government. Musgrave (1980) stated that value added tax is an indirect tax on the supply of
taxable goods and services by registered operators and it is charged when each time a
transaction, import or supply occurs. The value added tax in Zimbabwe is 15%.the tax give rise
of loopholes to collect more tax because some operators may not be registered yet they practice
operations. When operators are nor registered they cannot be charged value added tax. This
however leads to less revenue generated for the government.
To add on, there is high rise of industrial business closures in Zimbabwe the government is
unable to collect more revenue. Prest (1962) stated that corporate tax is tax that is charged on
industrial and commercial activities. Corporate tax is charged 25% from industrial and
commercial business as accordance of the current tax legislation. Due to the worsening economic
situation in Zimbabwe, most industrial sites are closing down. This results in having less
industries that pay corporate tax therefore reducing the revenue for government. Also when this
industries close more employers are left unemployed also giving rise to no tax being deducted
from their incomes resulting to less revenue.
In a nutshell, the government has many sources at which they can collect more revenue from.
These sources include taxes, rates and licensing. These sources are governed by certain tax
legislation and they are imposed to loopholes that make the government collect less revenue
from them. These loopholes include corruption lack of auditing machines and smuggling of
goods at border posts.
 With clear examples from Zimbabwe, clearly outline the general deduction formulae.
Deduction formulas are general principles that state whether certain expenses are allowable
deductions or not from one’s income. Allowable deductions are those expenses that are incurred
from carrying a trade. Makumbe, Mashiri and Mutandwa state that the general deductions
allowed are expenditures and losses that to the extent to which they are incurred for the purpose
of trade or in the production of income expect to the extent to which they are expenditure or
losses of a capital nature.
To start with expenditure and losses as part of the deduction formulae. According to the business
dictionary, expenditure is a payment of cash or cash equivalent for goods and services that can
be evidenced by a receipt or invoice and losses are cost that make rise to non-benefits to the tax
payer. Expenditures and losses are supposed to be incurred by a tax payer so that they be
deductible. Expenditures are voluntary expenses meaning they are paid willing and the taxpayer
knows he’s paying for them while losses are involuntary expenses that occur unknowably and
are unplanned expenses such as bad debts. For example if OK supermarkets make prepayments
to baker inns their supply, the amount prepaid is not deductible from the gross income of OK.

Commencing with, incurred as part of the formula. Allowable deductions includes amount that
have been paid and liabilities that have been incurred. Incurred implies that expenses are
supposed to have occurred and they are recorded as they are incurred rather being paid for. The
expenditure and losses are deductible in the year in which they have been incurred. This implies
that prepayments are deductible in the period they in which the expenses relate. Inorder for a
liability to be taxable deductible it should be due and payable.

Another part of the deduction formula is for the purpose of trade. Expenditure and losses must be
related to the business of the tax payer. Expenditure related to a business and has the motive of
profit making whilst having a foreseeable future is allowed to be deductible. There are three
types’ expenditures which can help in the performance of a business which are designed
expenditure, undersigned expenditure and expenditure incurred for the efficient performance of
the business. Designed expenditure is expected in a typical business such as payment of salaries
and wages, telephones and electricity. Undecided are those expenditures that are not expected by
a taxpayer such as occurrence of natural disaster. For example if a person sells laptops Inorder to
make profits is deductible.
To look at ‘not of a capital nature ‘as part of the deduction formulae. Expenditure and losses of a
capital nature are not allowed to be deductible on income of a tax payer even if other essentials
are met. There are ways that are used to determine if expenditure and losses are of capital nature.
For instance if ok purchases a warehouse to stock their inventory this is concluded that the
 amount is of a capital nature.

Commencing on, Exemptions as part of the deduction formulae. Tax-exempt refers to income
free from tax. The reporting of tax exemptionable items may be on a taxpayer's individual
informational purposes only. The tax-exempt article is not part of any tax calculations Tax-
exempt frees the taxpayer of any tax obligation to submit taxes on the tax-exempt income. For
example if TM Pick and Pay obtains a municipal bond from the state Inorder to raise funds for
their operations. When TM Pick and Pay makes interest income on municipal bonds issued the
profit is exempt from both federal and state taxes.
 References
AFRODAD (2011) what tax has to do with development? AFRODAD: Harare
Businessdictionary.com. (2016). BusinessDictionary.com - Online Business Dictionary. [Online]
Available at www.businessdictionary.com/definition/expenditure.html
[Accessed 7 march 2019].

Merritt, C. (2017)"Difference between VAT & Sales Tax" pocketsense.com

[online]https://pocketsense.com/difference-between-vat-sales-tax-5976890.html [accessed 7
march]
Musgrave, R, A. and Musgrave, P, B. (1994) Public finance in theory and practice, McGraw hill:
Tokyo
www.businessdictionary.com/definition/tax.html
Prest, A, R. (1962) Public finance in theory and practice, McGraw hill: Tokyo
Taylor, B. (1984) public finance and budgeting, McMillian and company: London