PHILLIMON MHLANGA
The Zimbabwe Revenue Authority (ZIMRA) has proposed a lenient tax regime which is a departure from prevailing punitive measures as it moves to collect more revenue.
The tax collecting agency proposal is now awaiting approval by the Ministry of
Finance and Economic Development. The current punitive measures have seen defaulters being charged 100 percent penalties. The severe penalties to tax evaders were to force compliance and boost revenue. This was, however, condemned by businesses.
ZIMRA technical manager, Agnes Huvaya, told Business Times that essentially the tax collector want to do away with penalties to encourage voluntary compliance.
ZIMRA has been hit by low tax compliance levels. It is estimated that more than 60 percent of registered tax payers are not remitting their fiscal obligations, according to official data from ZIMRA. This has resulted in ZIMRA being owed about $4bn in unpaid taxes as at end of December 2018.
“We have already revised the penalties but the model is awaiting approval,” Huvaya told Business Times.
“It’s more lenient than the previous one. If fact, it’s not on the punitive side but on the softer side. What we want to charge is the minimum. In essence we want to do away with penalties, if authorised, to encourage voluntary compliance.”
Analysts said the government’s revenue collector’s excessive penalties for tax arrears were undermining business.
Several companies took a swipe at ZIMRA for continuing to exert pressure on struggling business saying every document audit will result in 100 percent penalty.
Almost half of the revenue ZIMRA raised in the recent past was based largely on penalties levied on businesses. The move was piling pressure on already burdened taxpayer.
For example, ZIMRA last year charged TelOne $11m in penalties and interest for unpaid taxes, which related to outstanding bills.
ZIMRA head corporate communications, Francis Chimanda, this week told Business Times that the proposed penalty regime awaits Ministry of Finance and Economic Development approval.
“Penalties are charged in terms of the Taxes Acts and the Commissioner has the discretion to administratively review such penalties,” Chimanda said.
“The penalty regime shall be gazetted once approved by the Ministry of Finance and Economic Development.”
ZIMRA targets to collect $6,2bn this year, which represents about 76 percent of the $8,16bn 2019 national budget. Last year, it collected about $5 billion in tax revenue against a target of $4,3bn.
Previously, ZIMRA indicated that penalties were not deterrent enough, a situation which has resulted in surge in repeat offenders. This also resulted in low compliance, with very few complying with fiscal obligations.
In 2017, ZIMRA had proposed legislative measures to cause offenders be sent to jail, like what’s happening in other countries. Compliance is also low.
Zimbabwe’s economy has become largely informal, making it difficult for ZIMRA to collect taxes. Many companies have closed and many more continue to shut down due to operational challenges, reducing the tax base.
Corporates are the highest defaulters accounting for a huge chunk of the close to $4 billion debt.
