Tax dragnet stifles Delta
LIVINGSTONE MARUFU
The Zimbabwe Revenue Authority (ZIMRA)’s tax dragnet has swooped on the country’s biggest brewer, Delta Corporation, Business Times can report.
Speaking at the company’s analyst briefing in the capital Harare yesterday, finance director Alex Makamure said tax issues inflicted pain on the company.
“A total of US$20.5m on sugar tax was accrued for the period of between February to September 2024 with the estimate for calendar fiscal year 2024 at US$32m.Carbonated soft drinks accrued US$7.8m, cordials/Juice US$8.98m and alcoholic US$0.18m. The balance was accrued from other associates.
This caused unavoidable price increases arising from sugar tax, which dented volume growth.To cushion the customers, Delta has instituted ongoing strategies on pricing, product reformulations and pack size alignments,” Makamure said.
He said Delta has instituted an absorption of cost for price moderation by changing pack sizes.
“We have carried out some intensive marketing campaigns and moderated pricing have supported demand, mitigating the impact of the sugar tax. Competitiveness has been affected by grey imports, driven by sugar tax-related price increases and currency developments,” Makamure said.
He said the introduction of sugar tax drove price increases (Maheu and soft drinks).
The implications of the sugar tax comes at a time when Delta is battling with ZIMRA on the disagreement regarding the currency of payment for certain taxes and the methods of splitting the taxes by currency for the period 2019 to 2021.
Delta was ordered to pay US$54.7m by the Supreme Court after it lost its appeal to pay in local currency.
Delta has since appealed to the Constitutional Court.
” ZIMRA positions ignore the fair economic value of prior payments. The tax cases are ongoing. There are significant legal and factual issues still to be addressed. Adverse Supreme Court judgment is being challenged at the Constitutional Court, ” he said.
In its financial results for the six months to September 30, 2024, Delta reported a 85% spike in profit to US$41.053m from US$22.13m in the period under review.
Revenue for the group increased by 11% to US$389m in the period under review.
Going forward, the company will focus on protecting the balance sheet, optimum resource allocation, generating positive cashflows to fund the ongoing capital projects and turning around the regional operations.
