Innscor remits US$10m sugar tax

LIVINGSTONE MARUFU

Innscor Africa Limited, a publicly traded diversified conglomerate, has remitted more than US$10m in sugar tax over the past two years, a levy the group says has triggered significant unintended costs for its beverage operations, particularly in the cordial and carbonated soft drinks segments.

The tax, introduced by government in January 2024, was intended to widen the tax base and curb excessive sugar consumption. However, Innscor says the measure has weighed heavily on compliant manufacturers, raising production costs and distorting competition.

Board chairman Addington Chinake said the regulatory burden on formal operators continues to intensify.

“In addition to these historical positions, the regulatory cost burden on compliant, formal operators continues to increase,” Chinake said.

He singled out the Special Sugar Content Excise Duty as a major concern.

“Of particular concern has been the impact of the Special Sugar Content Excise Duty (‘Sugar Tax’), introduced on 1 January 2024. Since its inception, the group, through its affected beverage business units, has remitted a total of US$10.10m in Sugar Tax,” Chinake said.

According to the group, the levy has produced consequences far beyond its original policy intent.

“This levy has had the unintended consequence of materially raising the production cost of compliant local beverage manufacturers, directly suppressing demand in the Cordials and Carbonated Soft Drink categories, and simultaneously distorting the competitive landscape through the proliferation of cheaper, non-compliant, local and imported alternatives,” he said.

Innscor said it remains actively engaged with authorities on the need to revisit the application of the tax to restore competitive balance.

The group argues that a review would help ensure fair competition for compliant local operators, strengthen the formal market, and support further investment in domestic beverage production.

Chinake also raised concern over the cumulative impact of other statutory charges, particularly the Intermediated Money Transfer Tax (IMTT), which is levied on most banking transactions.

“As with most formal operators, the group’s overhead base has also been severely affected by the additional cost of the Intermediated Money Transfer Tax (‘IMTT’), which is levied on most banking transactions,” he said.

He added that the burden is compounded by the fact that IMTT is non-deductible for corporate income tax purposes.

“The effect of this cost is further exacerbated by the fact that IMTT cannot be deducted in the computation of Corporate Income Tax; this has had the effect of raising the group’s effective tax rate beyond the statutory level of 25.75%,” Chinake said.

Despite the mounting tax pressures, Innscor said it remains hopeful that legislative reforms will be enacted to support the sustainability of formal businesses.

The update comes as the conglomerate remains locked in a high-stakes tax dispute with the Zimbabwe Revenue Authority (ZIMRA) over contested tax assessments totalling more than US$18m.

Innscor has warned that the lack of clear guidelines and transitional measures within Zimbabwe’s evolving tax framework has created damaging uncertainty for the corporate sector.

The dispute places one of Zimbabwe’s most visible blue-chip groups against the tax collector, with broader implications for fiscal predictability, investor confidence, and the stability of the formal business environment.

At the centre of the disagreement is the issue of currency settlement during the turbulent 2019–2021 period, when Zimbabwe oscillated between local and foreign currency regimes.

Echoing sentiments previously raised by Delta Corporation in a similar matter, Innscor insists it fully discharged its tax obligations by settling liabilities in the functional currency of the time — the Zimbabwe dollar.

However, ZIMRA is now 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,” Chinake said.

He said the dispute stems from ambiguities in the law governing currency settlement during that period.

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

As of June 30, 2025, ZIMRA had issued additional assessments amounting to US$13.398m against Innscor’s divisions and subsidiaries, while associated entities face a further US$5.151m.

The group has formally objected to the assessments and challenged them in court, with cases currently at various stages of the appeals process.

Chinake explained that should the courts dismiss the appeals, Innscor expects the Zimbabwe dollar amounts already paid to be refunded.

However, he warned that such refunds would be processed:

“At the equivalent current value prevailing at the date that the refund occurs,”

—a mechanism that risks severe value erosion given the chronic depreciation of the local currency.

In line with Zimbabwe’s “pay now, argue later” principle, Innscor has already remitted substantial sums while contesting the assessments.

“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.

He said the payments have been recorded as taxation prepayments on the group’s balance sheet, pending the outcome of the appeals.

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

Revenue rose 19.4% to US$1.086bn, supported by strong volume growth across all core segments, underpinned by capacity expansion and pricing strategies aimed at maintaining affordability.

Profit for the year increased 6% to US$50.98m, from US$48.16m the prior year, despite absorbing a US$1.853m financial loss, largely due to exchange losses following currency devaluation in the first quarter.

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

Innscor invested over US$73m in capital expenditure during 2025, despite a challenging operating environment.

The group said it continues to engage authorities on removing unnecessary statutory bottlenecks to encourage investment, support formalisation, and unlock sustainable growth in the formal sector.