LIVINGSTONE MARUFU
Zimbabwe’s largest brewer, Delta Corporation Limited, says it has remitted US$200m in taxes contribution in the just ended financial year, underlining its status as one of the major contributors to the fiscus in a highly taxed environment.
Delta is worried that different tax interpretations could affect the company’s performance amid uncertainties created in the treatment of transactions for tax purposes.
Speaking at the commissioning ceremony last week, Delta CEO Matts Valela told the delegates that Zimbabwe’s largest brewer spent huge money on taxes thereby eating into business’ revenues.
“We continue to contribute significantly to the fiscus, having paid nearly US$200m in various taxes for the year just ended,” Valela said.
In a statement that accompanied the financial report for the fiscal year that ended on March 31, 2023, Delta chairman Stanford Moyo stated that there were significant complexities and uncertainties relating to the legislation on pricing, which were made worse by the ambiguous and largely impractical taxation framework.
“There has been significant currency changes in Zimbabwe since 2018 and these changes create some uncertainties in the treatment of transactions for tax purposes due to the absence of clear guidelines and transitional measures.
“There are further complications arising from the wording of the legislation in relation to the currency of settlement of certain taxes which give rise to interpretations that may differ with those of the tax authorities, thereby creating uncertainties in tax positions. The Zimbabwe Revenue Authority has made some assessments which imply the rejection of the ZWL$ as legal tender for the settlement of tax obligations that they deem were payable in foreign currency.
“These assessments are being objected to and challenged through the courts,” Moyo said.
Delta is concerned that the financial results may be impacted by foreign currency tax assessments resulting from divergent interpretations of the law regarding the currency of payment of some taxes.
Group revenue for the year to March 31, 2023, increased by 60% to ZWL$537bn in inflation adjusted terms.
Earnings before interest and tax grew by 371% to ZWL$102bn, reflecting the higher volumes, inflationary stock holding gains and the realignment of cost structures as the economy dollarised.
There were some significant increases in costs of fuel, imported raw materials and packaging, driven by the world markets, which were impacted by geopolitical developments.
Zimbabwe maintained significant contributions in foreign currency takings and has been managing the value chain partners to utilise both currencies.
The business has however experienced increased dollarisation of costs.
Delta said business is susceptible to pricing arbitrage opportunities, which due to exchange rate volatility impacts currency purchase decisions.
The group remains cash generative and has funded the on-going capital projects largely from its own resources.
The increased dollarisation of the economy may result in reduced volatility of inflation and the exchange rate; however there is a risk that increased dollarisation may lead to economic contraction.
Delta said there were also headwinds in the global economy, which are driving commodity pricing and supply disruptions, and the volatility of international financial markets.
