The Zimbabwe Revenue Authority (Zimra), which is contending with widening tax defaults by both individuals and corporates, says it is open to payment plans to prevent ballooning interests and penalties.
As at December 31, 2017, Zimra was owed almost US$4 billion in unpaid taxes.
Last year, Zimra opened the year saddled by a US$2,67 billion debt but it shot up 47,57 percent to close the year at US$3,94 billion.
A measly US$20,74 million was recovered during the course of last year, indicating the mammoth task confronting Zimra in collecting revenues.
Interestingly, the US$4 billion debt is almost equal to the US$4,3 billion revenue collection target set for this year.
Last week, Zimra head of corporate communications, Mr Canisio Mudzimu told The Sunday Mail Business that if companies and individuals fail to arrange payment plans, they risk having their accounts garnished.
“Clients are encouraged to avoid interests and penalties on outstanding amounts which are due to the State by approaching Zimra to agree on payment plans. In the event that taxpayers do not come forward or do not honour payment plans, Zimra will be left with no option but to resort to the recovery measure of appointment of agency (garnishee orders),” said Mr Mudzimu.
Garnishee orders, which are unpopular with tax defaulters, are issued in terms of the Value Added Tax Act (Chapter 23:12) and Income Tax Act (Chapter 23:06). Companies, particularly small and medium enterprises, have in the past been critical of garnishee orders saying they threaten the viability of their operations.
Some firms, including Packers International Private Limited – which owns Chicken Slice, Pizza Slice and Creamy Slice – challenged a US$20 million garnishee order in the High Court in 2015.
The High Court provided the relief sought by Packers International but the Supreme Court overturned the ruling, arguing that Zimra was within its powers to carry out tax assessments and enforce payment. Recently, Finance and Economic Planning Deputy Minister Terrence Mukupe insinuated that Government was now caught between a hard place and a deep blue sea, regarding garnishee orders. Deputy Minister Mukupe said if Zimra was to garnishee companies’ accounts, there could be unintended consequences in the form of job losses as most firms would close.
But Government also wants revenue to oil its machinery. Mr Mudzimu said Zimra uses garnishee orders only “as a last resort, where all efforts to recover outstanding taxes would have failed”.
“As you may be aware, Zimra engages its clients with tax debts to negotiate for payment plans, and if the payment arrangements are adhered to, no garnishee orders are placed.
“The Authority, therefore, urges its valued clients to negotiate with the Authority for payment terms and to adhere to the agreed payment arrangements to avoid garnishee orders, which are only used as a last resort in revenue collection,” said Mr Mudzimu.
Critics have claimed that many Zimbabweans do not have a culture of paying debts, as evidenced by a debt of up to US$2 billion also owed to local authorities. The banking sector is also battling to arrest non-performing loans (NPLs), which sky rocketed to 20,5 percent in 2015, as some serial borrowers failed to honour their obligations with banks.
NPLs had since come down to 7,08 percent as at December 31, 2017 mainly driven by the coming in of the Zimbabwe Asset Management Company (Zamco) – a special purpose vehicle created by the Reserve Bank of Zimbabwe to hive off debts from struggling firms. Zamco acquired NPLs amounting to US$987 million.
The internationally acceptable NPLs level is 5 percent, and the latest NPLs figure raises high expectations that the financial services sector is stabilising.
Meanwhile, in terms of revenue collection, Zimra has started on a high note, hitting US$350,97 million in gross collections against a budget of US$325,05 million. All tax heads performed well in January 2018 and it is now expected that revenue collections will steadily rise going forward as more firms purchase fiscal devices. Fiscalisation became legally enforceable in Zimbabwe after Statutory Instrument 104 of 2010 was gazetted on June 8, 2010.
Fiscal tax registers record financial transactions from businesses and transmit the data in real time to Zimra, and are therefore seen by Government as key to widening the revenue base.
However, the high cost of devices – of up to US$1 700 – previously affected uptake, and consequently revenue collection. But with Government approving more fiscal device suppliers, prices have marginally retreated to between US$350 and US$500, and more companies are complying. Mr Mudzimu concurred that there has been an increase in the uptake of fiscal devices “due to the marginal decrease in prices of fiscal devices”.
“The fall in the prices has been necessitated by the increase in the number of approved suppliers of the devices in the market. Fiscalisation promotes correct declarations and assists the Authority to have real-time business data, which will contribute to increased revenue collections.
“It is, therefore, anticipated that the fiscalisation programme will continue to significantly contribute to revenue collection in 2018 and beyond,” said Mr Mudzimu.
According to General Notice Number 307 published in the Government Gazette of June 23, 2017, the nine fiscal device suppliers announced are Zimra, Just I.T, Global Horizons (Private) Limited, Rumikon Computers (Private) Limited, Microwarehouse (Private) Limited, Axis Solutions (Private) Limited, Cortech Solutions (Private) Limited, Fiscal Revenue Solutions (Private) Limited and Fiscal Support Services (Private) Limited.
The initial list published in the Government Gazette of July 29, 2011, had six approved suppliers.
In terms of the VAT (Fiscal Recording of Taxable Transactions) Regulations, 2010 (Statutory Instrument 104 of 2010), the approved firms are authorised to manufacture, supply or distribute fiscalised electronic tax registers, fiscalised electronic printers and fiscalised electronic signature devices.
The fiscalisation programme entails the acquisition, installation and connection of fiscal devices by business operators to the Zimra server.