Innscor battles ZIMRA over tax demands

LIVINGSTONE MARUFU

Innscor Africa Limited, a publicly traded diversified conglomerate, has gone head-to-head with the Zimbabwe Revenue Authority (ZIMRA) over disputed tax assessments totalling more than US$18m, warning that the absence of clear guidelines and transitional measures in the country’s shifting tax framework has created damaging uncertainty for the corporate sector.

The dispute pits one of Zimbabwe’s most visible blue-chip groups against the taxman in a fight that has implications not only for Innscor’s bottom line but also for the predictability of the fiscal regime underpinning investment and formal business activity.

At the centre of the wrangle is the question of currency settlement during the turbulent years of 2019 to 2021, when Zimbabwe oscillated between local and foreign currency systems.

Innscor, echoing arguments raised by Delta Corporation in a similar case, insists that it has met all its obligations in full, paying in the functional currency of the time,  the Zimbabwe dollar.

However, ZIMRA is demanding that the principal amounts, together with penalties and interest, be settled exclusively in United States dollars.

“Innscor believes that the settlements it previously made to fully expunge its tax liabilities for these historical periods were in line with the legal requirements prevailing at the time of settlement,” said Innscor chairman Addington Chinake.

Chinake argued that the controversy arises from the ambiguity of legislation concerning the currency of settlement for taxes during that period.

“This has given rise to interpretations that differ from those of the tax authorities, thereby creating uncertainties in tax positions,” he said.

As of June 30 2025, ZIMRA had issued additional assessments of US$13.398m against Innscor’s divisions and subsidiaries, while its associate entities have been slapped with a further US$5.151m.

The conglomerate has formally objected to these assessments and challenged them in court. They are currently at varying stages of the appeals process.

Chinake explained that if the courts eventually dismiss the appeals, the company assumes that the Zimbabwe dollars already paid will be refunded. However, those refunds would be made “at the equivalent current value prevailing at the date that the refund occurs” — a mechanism that risks eroding value significantly given the Zimbabwe dollar’s chronic depreciation.

In line with Zimbabwe’s “pay now, argue later” principle, Innscor has already remitted substantial sums even as it disputes the taxman’s position.

“The group’s divisions and subsidiaries have so far paid a total of US$12.126m under the ‘pay now, argue later’ principle out of the total amounts assessed, whilst the group’s associate entities have paid a further US$4.934m,” Chinake said.

These payments, he added, have been recorded as taxation prepayments on the group’s balance sheet in anticipation of a successful appeal.

Despite the tax headwinds, Innscor delivered a robust set of results for the financial year ended June 30 2025.

Revenue rose 19.4% to US$1.086bn, driven by strong volume momentum across all core segments. This was enabled by capacity expansion projects and pricing strategies designed to keep products affordable.

Profit for the year climbed 6% to US$50.98m from US$48.16m the previous year, even after absorbing a financial loss of US$1.853m stemming mainly from exchange losses when the local currency was devalued at the end of the first quarter.

Depreciation and amortisation costs surged 16.2% to US$33.247m, reflecting the scale of the group’s recent capital investment programme.

Shareholders were rewarded with a dividend, supported by disciplined cost management and strong free cash generation.

While Innscor remains confident of prevailing in its appeals, the dispute with ZIMRA exposes the fragility of Zimbabwe’s investment environment, where shifting rules and ambiguous legislation can spark disputes running into tens of millions of dollars.

Corporate executives argue that such disputes ,particularly when applied retroactively, discourage fresh capital deployment.

They also highlight how compliant formal players face disproportionate pressure compared with informal operators who often escape the tax net altogether.