‘Don’t litigate tax disputes’

STAFF WRITER

Treasury has urged corporates to avoid taking tax disputes to court and instead resolve disagreements through direct engagement with the Ministry of Finance and the Zimbabwe Revenue Authority (ZIMRA), in a move aimed at curbing a growing wave of fiscal litigation involving major companies, including banks.

The guidance signals an attempt by authorities to contain escalating legal battles over tax assessments that have increasingly pitted government against some of the country’s largest taxpayers.

Permanent Secretary in the Ministry of Finance, Economic Development and Investment Promotion, George Guvamatanga, said firms were undermining faster and more practical resolution mechanisms by resorting to litigation that, in his view, often ends in favour of the revenue authority.

“I will advise corporates not to go to court to resolve tax matters. It is always best to engage the Minister of Finance and the Zimbabwe Revenue Authority (Zimbabwe Revenue Authority) on these matters and often you come up with a solution,” Guvamatanga said.

He argued that many of the disputes currently before the courts could have been resolved administratively, noting that the tax framework was clear on the currency of settlement for obligations.

“The tax laws have always been very clear that taxes are payable in the currency of trade,” he said. “The expectation was always that companies would remit to ZIMRA in the same currency.”

Guvamatanga said a significant portion of current disputes stem from companies collecting revenues in US dollars but settling obligations to the state in local currency, an interpretation he insisted has already been tested in court.

“For 90% of the current assessments, companies collected US dollars but paid ZIMRA in local currency. The law was very clear,” he said.

“That is why in most of these cases that went to court, judgment has gone in favour of ZIMRA.”

His remarks come at a time when Zimbabwe’s corporate sector is increasingly resorting to litigation to challenge tax assessments it considers flawed or excessive, with tensions particularly acute in the banking industry.

The financial sector has launched a coordinated legal challenge against the tax authority under the banner of the Bankers Association of Zimbabwe (BAZ), escalating a long-running dispute over the treatment of interest expenses in taxable income calculations.

Banks argue that recent assessments, applied retrospectively to the 2019–2025 period, have materially distorted profitability by disallowing interest expenses in the computation of taxable income, significantly inflating tax liabilities across the sector.

Industry executives say the measures have not only reduced earnings but also constrained lending capacity and increased the overall cost of doing business, warning that the dispute strikes at the core of financial intermediation in an already fragile economy.

At the centre of the conflict is an interpretation of Zimbabwe’s Income Tax Act that tax authorities say requires stricter treatment of deductible expenses, while lenders argue the approach departs from established practice and undermines predictability in the financial system.

Guvamatanga maintained that the State remains open to dialogue, insisting that administrative discretion exists within the tax system to resolve disputes without resorting to litigation.

“The Treasury and ZIMRA have always been open for discussions,” he said. “But once matters are in court, ZIMRA has no choice but to pursue them through the courts of law.”

The widening dispute underscores growing friction between government’s revenue mobilisation drive and corporate concerns over policy consistency, with investors increasingly watching how tax certainty evolves in one of southern Africa’s more contested fiscal environments.