Why ZIMRA’s VAT assessments could be legally void

STAFF WRITER

Legal experts have sounded the alarm over the urgent need to re-establish statutory fidelity within Zimbabwe’s tax administration, warning that the current revenue collection mechanisms risk breaching constitutional mandates and parliamentary sovereignty.

This crisis stems from a multi-currency VAT compliance architecture that presently rests on legally defective foundations, jeopardising the validity of substantial assessments issued by the Zimbabwe Revenue Authority (ZIMRA).

The dual-lane VAT system, for example, separate VAT reporting and payment channels for US dollars transactions and local-currency transactions, traces back not to any statute or regulatory instrument, but to a series of Public Notices issued by the Commissioner-General.

These administrative instruments are arguably ultra vires, lacking the force of law required to impose new tax obligations or to amend parliamentary statutes.

As early as March 2, 2022, the accounting firm Deloitte (now Axcentium) provided formal advice to the Ministry of Finance, warning that ZIMRA’s interpretation was “contrary to the spirit of VAT” and “misaligned” with the existing Value Added Tax Act.

In their representation, Deloitte cautioned that the “mechanics of VAT” require a net computation in which input tax is offset against output tax regardless of currency.

They further noted that attempting to collect gross output VAT independently of input VAT, based solely on the currency of receipt of output tax under section 38(4), without linking it to the composite calculation required under section 15, “defies the whole purpose of the VAT Act”.

Furthermore, Deloitte’s 2022 brief emphasised that under Section 28 of the Act, only one VAT (VAT7) return should be submitted, and that the Commissioner appeared to be “enacting new laws” by requesting taxpayers to submit dual returns.

No specific VAT Act section has been cited for abandoning the single return architecture except that it accords with judgements such as Prosperous Day v Zimra HH24/21 and Inamo v Zimra SC96/23.

Central to the current legal critique is the hierarchy outlined in Section 78 of the VAT Act, which entrusts regulatory authority to the Minister of Finance via Statutory Instruments, not administrative Public Notices.

Public Notices such as PN 15/2019, PN 68/2022, and PN 75/2022 introduced a bifurcated registration mechanism using separate Business Partner (BP) numbers per currency lane – a construct absent in the VAT Act or the Regulations.

The current VAT return architecture under the Tax and Revenue Management System (TARMS), with two separate columns for each currency departs from the statutory return contained in the VAT Regulations, hence cannot be the basis for the additional assessments.

This administrative contrivance systematically displaces mandatory statutory provisions: Section 9(3) mandates the conversion of all transactions into a single reporting currency for valuation, Section 15 prescribes a net VAT computation aggregating output and input tax without currency segregation and Section 28 enforces a single VAT return per registered operator per period.

“The Law is the Law”: The government responds

The government, however, maintains a firm stance on these enforcement measures.

Permanent Secretary for Finance George Guvamatanga addressed the brewing corporate resistance by dismissing the reliance on what he terms “technicalities.”

At a media briefing last week, Guvamatanga stated: “We have noticed a trend where corporates want to pick and choose which parts of the tax code to follow based on their own convenience. Let me be very clear: the obligation to pay tax in the currency of trade is not a suggestion. It is a statutory requirement that has existed since 2019. If you collected US dollars from a customer and failed to remit those specific dollars to the state, you are in default”.

“We are not creating new law; we are simply enforcing the law that was already there. To those seeking to bypass these obligations through the courts: the fiscus will not be held hostage by ‘technicalities’ when the intent of the legislature was always clear.”

However, legal practitioner Paida Makoni noted that Guvamatanga’s “intent of the legislature” argument falls apart under the principle of nullum tributum sine lege (no taxation without law).

Makoni argues that ZIMRA’s duty to collect, as confirmed in Curverid v ZIMRA (SC 114/25), is strictly bounded by what the statute actually says, not what the Commissioner desires it to say.

The counter-narrative emphasises that ZIMRA’s current assessments often result in “supplementation rather than correction,” producing systematically excessive outcomes by ignoring ZWL credits.

High Court precedents such as Woodthorpe Investments v ZIMRA (HH 220-26) and JK Motors v ZIMRA (HH 762-22) provide the “nullity pathway,” suggesting that if an assessment is issued under the wrong authority (a Public Notice vs. a Statute), it is void on its face and cannot trigger the mandatory “pay-now-argue-later” mechanism.