Abstract

The implications of the formation of a customs union on revenue and welfare of a country are ambiguous and depend on a number of factors.  The theoretical ambiguities give rise to the need for empirical studies that generate information for a particular customs union that is under consideration. Zimbabwe is among the COMESA member states that are actively participating in the preparations for the implementation of the COMESA customs union that has so far missed two deadlines and is now scheduled for 2015. This study provides a quantitative assessment of the potential revenue and welfare implications of the COMESA customs union on Zimbabwe. The study uses the Trade Reform Impact Simulation Tool for analysis. The findings of the study reveal that the customs union imports will decline by US$79 million. However, the country will witness increase in total revenue by 9.1%. The increase in revenue has been necessitated by the incorporation of VAT revenue into the model. It is therefore important for Zimbabwe to put in place austerity measures meant to improve revenue collection from other sources such as Value Added Tax and income tax if the import tariff revenue loss is to be curtailed.