Zimra must think outside the box | The Herald

via Zimra must think outside the box | The Herald June 3, 2014 by Tafara Shumba

For the first quarter of the year, the Zimbabwe Revenue Authority (ZIMRA) collected US$834,6 million in revenue, against a target of US$817,9 million.
This represents a marginal excess of 2 percent, thanks to the heavy-handed approach that the revenue collection agency has taken to recover tax money owed to it by several companies.
Although the aggressive approach yielded positive results for ZIMRA, though negligible, there is a grave risk that the approach might soon work at cross purposes with the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset).

The excessive garnishing of ailing companies leaves them on their knees.
While revenue targets are being met and exceeded, ZIMRA is shooting itself in the foot in the long run.
Most of these companies will close shop and that will spell a perennial dry fiscal season for ZIMRA.

Rock Foundation Medical Centre, which was an employer to hundreds of workers, closed down due to excessive demand of tax arrears.
The Civil Aviation Authority of Zimbabwe was recently garnished while several other companies have been given ultimatums to pay the arrears, some in excess of US$5 million, in just three months.

No firm operating in this harsh economic environment can remain on its feet after paying such colossal arrears.
Most of the arrears date back to 2009 and include heavy penalty and interest charges.

In all fairness, ZIMRA must tone down on its approach considering that it has been in a deep slumber since 2009 while the arrears were soaring to shocking magnitudes.

It is necessary for ZIMRA to work out a payment plan so as to avoid company closures and subsequent loss of employment, more so in the face of Zim-Asset which seeks to boost investment.

It makes a lot of sense to have small but sustainable amounts of revenue trickling in than making a once off killing.
They say half a loaf is better than none. Gershem Pasi, the Commissioner-General of ZIMRA, recently said: “We need to meet our targets, not just today, but as long as there is a nation called Zimbabwe.”

If ZIMRA does not scale down on its demand on tax, there will be no revenue tomorrow as the sources will soon dry up.
Some of the firms that ZIMRA is descending on are not absolute tax dodgers.

They have been conscientiously complying with the payment plans they agreed upon with the tax liaison officers stationed at ZIMRA.
It’s pathetic that some companies that have since folded, especially in Bulawayo, are selling equipment and machinery to pay tax arrears. In line with Zim-Asset, these companies could instead be recapitalised or granted tax amnesty as an incentive to boost their growth. It worked in South Africa.

In this unfavourable economic climate, it’s a fact that everybody owes somebody.
Even the Government itself is in arrears and to some extent it owes the very companies that ZIMRA is descending on.

ZIMRA itself is also mired in debt.
The economic challenges besetting our economy need extraordinary measures. Business as usual for ZIMRA will not work. Instead of squeezing the ailing companies that have at least resisted the economic downturn, ZIMRA must think outside the box and widen its tax collection base.

Capturing revenue contributions from the informal sector remains a talkshow. It seems Zimra has no capacity to monitor business transactions in this sector.
The informal sector accounts for 60 percent of all business and US$3 billion to US$7 billion is circulating in this sector.

If ZIMRA expeditiously targets this sector, it could tremendously expand its tax pool.
Some of those in the informal sector yield more than the ailing traditional firms but the taxman is doing nothing to bring this sector into the tax net.

We should begin to see the registration of all the informal sector businesses for easy follow-up on tax.
Most of the houses in Newlands, Eastlea, Belvedere, Milton Park, Avondale and Mt Pleasant, among others, have been turned into companies.
It is doubtful whether these small but thriving companies are remitting taxes.

It’s unfortunate that ZIMRA still heads for Graniteside, Msasa and other industrial sites when there are flourishing businesses in the residential areas.
In other countries like Canada, landlords pay tax on the profits they make from renting out houses.

There are some property magnates who collect monthly rentals which surpass the monthly turnover of some big companies. These people must pay tax, perhaps after deducting allowable expenses.

For countries like Ethiopia, a villager remits tax after selling even a goat.