ZIMRA trapped in tax nightmare

CLOUDINE MATOLA

The Zimbabwe Revenue Authority (ZIMRA), the country’tax collector,  is facing a deepening tax enforcement crisis as the dominance of the cash economy, rampant informality, and high-profile tax disputes involving corporate heavyweights, lay bare the fragility of the country’s tax collection system, Business Times can report.

ZIMRA Commissioner General Regina Chinamasa this week delivered a blunt assessment of the authority’s operational headaches, pointing to the untraceable nature of cash transactions, limited investigative capacity, and evolving transaction structures as key obstacles undermining revenue mobilisation efforts.

“The cash economy makes it difficult to enforce some of the tax rules,” Chinamasa conceded. “The level of disputes we are seeing speaks to the non-traceability of transactions and limited capacity for audits and investigations. We need to continuously realign ourselves to developments on the ground.”

While Chinamasa stopped short of naming specific cases, insiders say protracted tax disputes with blue-chip companies like Delta and Innscor have exposed glaring weaknesses in ZIMRA’s audit and enforcement capabilities.

Delta Corporation, Zimbabwe’s largest brewer, is locked in a multi-million-dollar tax wrangle with ZIMRA over alleged under-declarations and discrepancies linked to its extensive cash sales, according to people familiar with the matter.

Similarly, Innscor Africa, the country’s largest food and retail conglomerate, is also battling the taxman over assessments related to its sprawling retail network, much of which still relies heavily on cash transactions that are notoriously difficult to track.

“These corporate tax disputes highlight exactly what ZIMRA has been saying for years — the cash economy creates blind spots, even among the largest taxpayers. If Delta and Innscor, with their resources and systems, can be caught up in this, imagine the scale of the problem in the informal sector,” a senior tax consultant told Business Times.

The deepening crisis comes against the backdrop of an economy where over 70% of transactions are estimated to occur outside formal banking channels, rendering vast swathes of economic activity invisible to regulators.

Despite this, ZIMRA has reported collecting ZWG76.4bn in the first half of the year, marginally ahead of its ZWG75.9bn target — a performance Chinamasa attributed to intensified enforcement, tax base expansion, and strategic policy advisory.

“We are on course to meeting our 2025 target. The results we’ve posted so far are a testament to our commitment to revenue mobilisation and the effectiveness of our current strategies,” she said.

ZIMRA has set an ambitious US$7.155bn revenue target for 2025, but tax experts warn that without decisive action to tackle informality, cash transactions, and corporate non-compliance, those targets will remain a moving target.

“The voluntary disclosure drive for smuggled vehicles is a start, but if the Delta and Innscor cases show us anything, it’s that enforcement gaps exist even at the top end of the tax base,” economic analyst Persistence Gwanyanya said.

The voluntary disclosure initiative, which offers a one-month window for individuals with illegally imported vehicles to regularise their status without facing punitive penalties, has been positioned by ZIMRA as part of a broader crackdown on revenue leakages.

“We are doing a carrot-and-stick approach. People have one month to come forward and regularise their vehicles. It’s another source of revenue, but more importantly, it ensures we have properly customed goods within the country,” Chinamasa explained.

Beyond vehicle imports, ZIMRA is banking on technological innovation — including artificial intelligence — to plug revenue leakages and boost compliance.

“The digital trajectory is a game-changer. AI helps us pinpoint non-compliance, and we can expedite enforcement processes,” Chinamasa noted.

But critics remain sceptical. They argue that without structural economic reforms to formalise the vast informal sector and reduce cash dependence, even AI-powered enforcement will struggle to keep pace.

The recent introduction of the Zimbabwe Gold (ZWG) currency was meant to stabilise the economy and restore confidence in formal financial systems, but cash remains king — not only in informal markets but also among established businesses, creating fertile ground for tax evasion and disputes.

Independent economist Gift Mugano was blunt: “Digitalisation is good, enforcement is good, but when 70% of your economy operates informally and relies on cash, you’re fighting an uphill battle.”

Meanwhile, the Delta and Innscor tax wrangles, sources say, have triggered quiet panic among other large corporates, many of whom fear similar scrutiny as ZIMRA intensifies its sector-based audits.

“The message is clear, no one is immune. But the real question is whether ZIMRA has the capacity to follow through, especially given how complex some of these corporate structures and transactions are,” a Harare-based tax expert observed.

For ZIMRA, the clock is ticking. While exceeding revenue targets in the short term offers a glimmer of hope, experts warn that systemic weaknesses — from limited audit capacity to structural informality — will continue to undermine long-term revenue stability.

As Chinamasa conceded, the tax authority must remain agile, technologically equipped, and prepared for constant evolution if it is to navigate Zimbabwe’s complex, cash-driven economy.

“We need to continue to be aligned to developments that are happening,” she said. “Only then can we effectively manage and complete the transactions that we deal with.”