Phillimon Mhlanga
The Zimbabwe Revenue Authority (ZIMRA) will launch the country’s biggest tax dragnet to swoop on tax evaders, estimated to be more than 70% of the country’s registered taxpayers, after the expiry of a government-sanctioned grace period for tax dodgers to pay up, at the end of the year.
According to ZIMRA’s commissioner-general, Faith Mazani, ZIMRA is owed more than $4bn in unpaid taxes by thousands of companies, and the tax collector will descend heavily on tax dodgers after the expiry of the moratorium.
She said ZIMRA would intensify its efforts to collect more revenue by applying several measures such as intensifying tax audits going as far back as six years, garnishee orders, chasing third parties such as taxpayers’ debtors, and gaining access into all regulatory authorities’ database to get names and trading data.
This means, regulatory bodies would submit names of their newly registered clients to the tax collection agency. ZIMRA would then make follow-ups on these clients.
“We have a serious challenge where more than 70% of taxpayers are not complaint,” Mazani said. “The figures of smuggling goods into the country are huge. We want to plug revenue linkages, and fight against corruption because many are not making themselves known and seen by the tax collector.”
She continued: “If all that revenue had come back, we would have been a middle income country by now. Voluntary disclosure come to an end on December 31, meaning to those who did not heed the call, we are going for full enforcement to bring them into the tax net. This means we are going full throttle into audits (companies and life style), whistleblower, and we are going to use third parties to bring them into the tax net.”
Tax experts told Business Times that such a move would have adverse effects on companies. “We are very aware of the concerns raised by ZIMRA, but implementing strong measures to nab companies means they will face enormous compliance burden from the tax dragnet. Such a development will kill the goose that lays the golden eggs,” said a tax director with one of the country’s big four advisory firms who requested anonymity.
The government is heavily reliant on tax collections due to the lack of budgetary support from the donor community, but growth in the informal sector has resulted in many businesses operating outside the tax collectors’ radar.
Also, many companies have closed and many more continue to scale down operations due to operational challenges, reducing the tax base.
This has resulted in the government struggling to pay the over 500,000 public workforce. As a result, the country’s tax collector has resolved to clamp down on tax evaders.
Mazani revealed that despite the voluntary disclosure programme extended to all businesses or persons who have unpaid tax or duty obligations, only 30% of tax payers responded, leaving 70% non-compliant.
The high level of non-compliance means Zimbabwe’s tax burden is being borne by few businesses and employees who cannot escape the tax. This has been attributed to high levels of corruption, negative perceptions by taxpayers, and lengthy prosecutions.
Travellers and transport companies endure long periods of waiting at the country’s border posts, sometimes over 24 hours before clearance, a situation which has stimulated a vibrant underground system that usually benefit ZIMRA officers rather than the State. People pay through the back door to either evade the high customs duty or fast-track their travel.
The rampant corruption, mostly blamed on ZIMRA officials at entry points, has hit hard ZIMRA’s capacity to deliver.
The low revenue collection situation has been worsened by the high unemployment in the country, which is estimated to be more than 90%, meaning that only 10% of eligible taxpayers are paying tax.
Under the voluntary disclosure programme, ZIMRA encouraged taxpayers to come forward and volunteer disclosure of omitted income and other tax compliance obligations in exchange for reliefs on penalties and prosecution.
The move presented an opportunity for all businesses or persons to disclose incomplete or unreported tax and settle it.
