PHILLIMON MHLANGA
Finance Minister Mthuli Ncube faces a delicate balancing act in face of trying to reconcile the need for tax revenues to fund government operations and at the same time ease the tax burden on local companies reeling from the adverse effects of the coronavirus pandemic.
Zimbabwe’s fiscus has limited flexibility to respond to economic and social challenges, meaning President Emmerson Mnangagwa’s administration is at a critical juncture because it relies heavily on tax revenues to fund its operations and does not enjoy external budgetary support as the government remains in debt arrears with international creditors.
Zimbabwe is suffering from economic decay and is expected to slip into a recession again this year having shrunk 6.5% last year.
The citizens have been buffeted by soaring prices of goods and services
and a weak local currency.
Government recently announced some tax relief to companies and spending plans.
But, Ncube, who believes in strict fiscal measures, admitted the road ahead for Zimbabwe will be long and winding for the government.
He admitted the move was a tough balancing act as the government also wanted revenues to fund the ZWL$18bn stimulus package and also
deal with the funding of government operations.
“But, at the same time, we as government would need revenue to pay for the services and to pay for the stimulus package. You can imagine
cash transfers for the vulnerable and stimulus package in terms of supporting companies. It’s amazing; you need taxes to enable us to meet incentives we have committed.
“So, that is a very delicate balance. We will try our best to achieve that balance of minimising the tax impact and at the same time raising enough
revenue to support the stimulus and (government) operations. That’s quite a delicate package,” Ncube told a CEO Africa Round Table digital meeting last week.
Government has provided tax relief for local companies in response to the deadly Mthuli Ncube at crossroads coronavirus pandemic, which has ravaged economies across the world.
The development comes at a time when revenue authorities across the world are facing a truly unprecedented situation due to the virus, also
known as Covid-19.
Mnangagwa has extended the national lockdown indefinitely in the quest to slow down and limit the spread of the virus, something which
has caused economic distress throughout societies as many businesses cannot trade as they used to do and borders are closed.
Given this, there has been frustration and uncertainty around the difficulties in submitting income tax returns, value-added tax (VAT) processing and the publication of the country’s transfer pricing
practice notes.
Ncube disclosed that the government has provided some tax relief for local companies including fast-track VAT refunds and deferment of duty payment.
In terms of attracting customers by the tourism sector, Ncube said the government was looking at removing VAT as part of efforts to revive the
sector, which has been hit the hardest by the emergence of Covid-19.
“We have done something on the tax side,” Ncube said.
“Companies should take their time in paying what is due. They (companies) can ask for special dispensation to be able to pay what they owe prior to the lockdown. So, we have a bit of flexibility on the tax front.”
The country’s tax collector, the Zimbabwe Revenue Authority (ZIMRA), under Public Notice number 20 of 2020 published recently, will
endeavour to expedite the processing of legitimate VAT refunds and process such refunds within 30 days provided that the taxpayers meet specified criteria.
The public note sets out the criteria and procedures to be followed
by taxpayers to facilitate this process.
Government’s latest move on tax comes after African Tax Administration Forum (ATAF) in its latest publication suggested measures African countries can consider implementing as the pandemic spreads across the
continent.
These include the extension of tax deadlines, flexible payment plans, suspension of penalties and interests and suspension of compliance and
enforcement activities and expedited tax refunds.
On extension of deadlines, ATAF said onsite regularisation can be carried out when the business environment has normalised.
This will require resources like digital storage capacity and clear guideline and communication to all parties on the process obligations and
responsibilities.
The deadline for filing tax returns should be extended to accommodate the disruption taxpayers may be facing due to the pandemic.
ATAF said all taxpayers should be considered as the extension will play a dual role of easing burden on taxpayers and limiting the transmission
risk of revenue authority staff where digital channels are limited or non-existent.
ATAF also said revenue authorities, across the continent should consider granting taxpayers flexible payment plans like monthly or bimonthly
instalment payments over a certain period beyond the extant due date. This will ease some of the economic burden the pandemic may cause for
the taxpayers.
It said the flexible payment plan may also include the suspension of payments for a certain period. Depending on the administrative resources
available to the revenue authority the flexible payment plan may be same across taxpayers or differ dependent on the compliance history of the
taxpayer or economic sectors.
The other suggestion from ATAF is that the imposition of penalty for late filings can be suspended during this period.
The period may be based on the extended deadlines with provision for waiver of late filing penalty for taxpayers who can show that the
non-compliance with the extended deadline to be due to disruption caused by the pandemic.
Also, ATAF suggested that the imposition of penalty and interest for late payments can also be suspended for a certain period in line with flexible
payment plans given to taxpayers and provisions made for waiver of interest for late payments of remittances for taxpayers who can show that
the non-compliance with the flexible payment plan to be due to disruption caused by the pandemic.
Apart from that revenue authorities should consider the total suspension of compliance and enforcement activities or limiting the activities to specific situations like where there is a clear case of fraud or elopement of the taxpayer, ATAF suggested.
The activities in this context consist of field activities like compliance check audit and other activities like debt recovery actions and more.
The suspension should be for a period that allows taxpayers to get through the pandemic and return to a material Mthuli Ncube level of operations.
The idea is not to add to the burden of the taxpayers during this period or add to the hurdles of recovering from the pandemic.
While compliance and enforcement activities may be suspended for a certain period revenue authorities should continue with compliance risk assessment and have a cohesive plan on how to effectively and efficiently carry out the compliance and enforcement activities after the suspension without substantially disrupting the recovery of businesses.
ATAF also suggested the expedition of tax refunds.
It said the turnaround time for payment of refunds should be expedited to ameliorate the possible cash-flow issues that taxpayers may face
due to economic hardships that may be caused by the pandemic.
The refund process should be streamlined for efficiency during this period with compliant taxpayers and taxpayers in essential sectors prioritised
for an expedited tax refund.
While revenue authorities consider paying out VAT refunds as quickly as possible it is probably also a good idea to consider the suspension
of the payment of interest on outstanding refunds as the priority should be to pay out as many refunds as quickly as possible and not to prioritise
refunds based on the interest that may be accumulating.
