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Unscrupulous investors take advantage of Zim’s economic benevolence
Phillimon Mhlanga
HARARE – Zimbabwe lost $1,019 billion in taxes due but not collected in the first quarter of this year due to value added tax (VAT) and zero rating exemptions.
In addition to tax expenditure, the country could have lost more as a result of tax scams at the country’s porous border posts and under-reporting of incomes by companies, resulting in huge amounts of taxes going uncollected.
The Zimbabwe Revenue Authority (ZIMRA) commissioner general, Faith Mazani, who was appointed to her position in February this year, said the unpaid tax from supplies of goods and services represented 47,80 percent of the total potentially collectible amount of $2,132 billion during the reviewed period.
“During the first quarter of 2018, tax expenditure or revenue foregone amounted to $1,019 billion, which is 47,80 percent of the total potential revenue of $2,132 billion for the same quarter,” Mazani said.
Tax expenditure is tax revenue that government foregoes or tax concessions provided in order to support investment, production or limit the tax burden on producers or consumers of products and service either for private or business consumption.
Tax experts told The Business Times that tax expenditure comes as a result of rebates on duty on the importation of capital goods for qualifying people or entities, income tax holidays for qualifying business investors where all other tax payers are required to pay the full taxes due.
This also includes exemptions in respect of capital gains for qualifying disposals of property or stocks, where other tax payers are required to pay full tax.
There are also VAT exemptions for certain or specified imports and locally supplied goods and services, zero rating for certain goods, imported or locally supplied goods and services. This also includes zero-rating of commercial direct exports.
Mazani said while ZIMRA supports the current thrust of the new dispensation and government under the mantra “Zimbabwe is open for business”, the country’s tax collector which provides advisory services to government and prospective investors with respect to taxation, imports provisions and controls, was ready to play as gate keeper for government.
She expressed disquiet saying the granting of concessions “contributes to the erosion of the tax base”.
“Concessions under domestic taxes include tax holidays and various allowable deductions from gross income before the tax rate are applied,” Mazani said.
“Such numerous tax concessions usually result in companies ending up in loss position thereby reducing the collectible taxes. Under Customs and Excise, various rebates and suspensions to duty are extended on the importation of capital equipment.
“The cost of these importations is also eligible for the deductible allowances under domestic Taxes. The granting of these concessions create an uneven playing field on businesses and contributes to the erosion of the tax base,” she said.
Mazani added: “We are also ready to play as gate-keeper for government against unscrupulous investors who may want take advantage of the country’s economic benevolence.
“ZIMRA expects that incoming investors will contribute not only their fair share of tax revenue but also in creating employment and economic development by bringing in new technologies. However, there should be a level playing field for existing businesses to ensure equal opportunities for both local and foreign investors.
“There is need to balance revenue collection and “open for business” opportunities.
“As a country, we need to be aware of the fact that tax concessions, which are granted to investors , tend to erode the revenue base. Therefore, checks and balances to ensure that concessions extended to investors do not outstrip the envisaged benefits to the economy must be employed.”
ZIMRA is also grappling with smuggling and other forms of underground activities at all ports of entry, resulting in the country losing millions of dollars.
Mazani said the authority was facing challenges to curb the scourge.
Without disclosing amounts lost in the first quarter of 2018, she indicated that the country’s porous border posts have led to serious loss of revenue.
Transporters are delayed at the border posts with cargo spending several days awaiting clearance at the ports.
She added that this was contributing significantly to the depletion of revenue inflows into State coffers.
“Zimbabwe has not been spared this fiscal drainage,” Mazani said.
“We have seen the levels of smuggling and under-valuation go up, revenues are lost through fraud and other under-hand dealings,” she added.
Sheila Mashiri, the chairperson of the Shipping and Forwarding Agents Association said delays and high demurrage costs were negatively impacting transporters and end users.
“This is really impacting on us,” Mashiri told The Business Times.
“Apart from the damaging delays at Beitbridge port, the situation has been worsened by ZIMRA’s decision to refer cargo to Harare and Bulawayo for physical examination.
“The impact is higher than the Beitbridge one. For example, a truck load at Beitbridge cost about $34.30 for a container to be physically examined. But, when referred to an inland port like Harare, ZIMRA refers transporters to agents like Bak Storage and Manica.
Unlike at Beitbridge, Bak Storage and Manica Freight open Monday to Friday and are not working 24 hours like Beitbridge. Information we have gathered from our members, is that the charges in Harare and Bulawayo go up to ten folds compared to Beitbridge charges,” Mashiri added.
Mazani said tax evasion was also on the increase as big companies were engaging in transfer pricing and “unholy tax planning”.
She warned taxpayers to desist from corruption.
“ZIMRA’s relentless fight against corruption continues unabated and we will never tire until the war is won,” Mazani said.
“We have a zero tolerance to corruption. We will continue to urge the nation to desist from all underhand dealings such as smuggling, tax evasion, use of undesignated crossing points, and any other acts of economic malfeasance.”
Mazani said ZIMRA has put in place strategies to fight the scourge.
“ZIMRA employs a number of strategies to fight the scourge,” she said.
“These include the use of hotlines for receiving anonymous information on corruption, the whistle blower facility where informers are rewarded for information that leads to the recovery of tax revenue from reported defaulters and lifestyle audits covering the public and both managerial and non-managerial ZIMRA employees,” Mazani added.
Zimbabwe, according to official data from ZIMRA, has 15 border posts with Beitbridge Border Post being one of Southern African Development Community’s busiest ports linking Zimbabwe and South Africa operating 24 hours a day.
The country, however, appears to be losing millions of dollars through smuggling and other activities.
Though ZIMRA has invested heavily in high tech scanner equipment (baggage and palletised), post importation audits, physical searches and whistle blowing initiatives and cargo monitoring, culprits continue to smuggle goods into the country.
ZIMRA has also invested in Automated System for Customs Data (Asycuda) computer system which is more efficient and advanced for customs data processing.
Though the system is believed to be water tight, some ZIMRA officers however find their way around it facilitating smuggling of several commercial goods into the country.
The Zimbabwean government relies almost entirely on tax collections to fund its operations.
According to Mazani, ZIMRA’s collections are more than 80 percent of government’s fiscal budget.
The tax collector drives its mandate from the Revenue Authorities Act and subsidiary legislation to assess, to collect and account for revenue on behalf of the State through the Minister of Finance and Economic Development.
