Source: Tycoon in hot soup over $6million bill | The Sunday Mail February 10, 2019
A LOCAL business tycoon is at the centre of a suspected tax evasion scam after the Zimbabwe Revenue Authority (Zimra) uncovered a $6 million debt accrued between 2010 and 2018 by two companies under his diversified portfolio.
Zimra is now seeking settlement of the cumulative debt and has written letters of demand to American Motors (Pvt) Ltd and Mahindra Zimbabwe (Pvt) Ltd (MahindraZim), both owned by Sanjay Babbar, a Kenyan-born businessman with interests in real estate, vehicle trading, agriculture and financial services, among several other ventures.
According to the letters of demand, American Motors owes the taxman $5 226 404 accrued between 2010 and February 2018, while MahindraZim raked up a tax bill of $449 055 between 2015 and 2016, which Zimra demanded on November 6, 2018.
These amounts include the principal debts, interest charges and penalties.
According to a whistle blower’s report to Zimra, which apparently led to the exposure of the tax arrears, Babbar (51) allegedly used various duplicitous methods to evade tax, including de-registering his heavily indebted entities and registering new ones offering substantially the same goods and services from different premises.
The reports claimed that Babbar was routinely opening and closing companies to avoid paying taxes and ran American Motors from 22 Edson Crescent in Graniteside, Harare, from 2010.
After incurring the huge tax bill during the period the country was using the United States dollar as the currency of trade, Babbar registered MahindraZim in 2015, which went on to accumulate a bill of nearly half a million dollars in its first year of operation from a location in Newlands.
A de-registration audit subsequently carried out on American Motors by Zimra showed that the company was owing the State over $5 million, which the authority demanded early last year.
MahindraZim, which imports and supplies utility vehicles to private companies, Government departments, parastatals, local authorities and schools, failed to settle the amount, resulting in Zimra writing to the company on August 18 2018 demanding original purchase invoices, sales schedules, input tax schedules, bank statements, copies of bill of entries and original VAT withholding certificates.
Zimra sought the documents as it stepped up efforts to recover its dues amid allegations that MahindraZim (BP#200170647) did not have a fiscalised machine for tax purposes as required by law.
Citing client confidentiality, Zimra’s acting head of corporate communications Mrs Izwirashe Muwonwa recently said the authority could not comment specifically on issues relating to American Motors and MahindraZim but revealed that the authority was aware of tricks used by corporates to avoid paying taxes.
Mrs Muwonwa said Zimra was facing a number of challenges in efforts to collect taxes.
“The challenges we face as a revenue authority include the prevailing economic conditions in which companies are going under liquidation, the defaulting on payment plans by clients, taxpayers changing physical addresses without notifying Zimra and taxpayers closing companies with tax debts and opening new ones,” she said.
She said Zimra had put in place various measures to strengthen the tax collection system.
These included increased interaction with clients through various physical and cyber platforms, taxpayer education, increased audits, fiscalising the majority of registered clients and vigorous implementation of debt management and recovery strategies like garnishees. “We are also encouraging voluntary compliance through voluntary disclosure of tax debts and working towards providing a simplified tax regime for micro and small taxpayers,” said Mrs Muwonwa.
MahindraZim’s spokesperson Mr Prometheus Chiwara said he could not disclose the company’s tax obligations as it was a private entity, but said they were engaging Zimra on the downward revision of some amounts which they were said to owe.
“It is not unusual for any company to have tax arrears. I cannot divulge our tax obligations because it is a matter between us and Zimra.
‘‘We are engaging them to find common ground in cases where the amounts are in dispute.
“In the case of the $400 000 debt you are referring to for example, I can tell you that the figure has since been reduced to around $100 000 after our engagement with Zimra,” said Mr Chiwara.
He could, however, not produce documentary evidence that Zimra had agreed to lower its demand.
Zimra says is owed a massive $4 billion in taxes by an estimated 4 000 non-compliant companies operating without registering for tax purposes.
Around $2 billion of this or 50 percent is the principal debt, while $1 billion (23 percent) is in interest, with the remaining $1,1 billion (27 percent) being penalties.
Under the Transitional Stabilisation Programme unveiled by Finance Minister Professor Mthuli Ncube, the Government will from this month introduce robust tax administration measures to increase compliance and widen the domestic revenue base with is critical for economic growth.