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A cursory survey will show that most debts were accumulated by companies in the five-year period to 2014. Many errors were made during this era. If possible, it would do a world of good if Zimra can slash or even remove debts accrued during such trying times.
THE tax amnesty declared by the Zimbabwe Revenue Authority has since come to pass, but are there any demonstrable benefits of this intervention?
Only the taxman knows.
The sad reality on the ground today is that many companies are either closing shop or shedding jobs after being hounded out of business by Zimra’s stringent, and often suffocating regulations.
But it must be acknowledged that when they do their work, they are simply following prescribed rules and regulations.
It is the opinion held by many in industry today that Zimra has been too hard on companies of late. Most often than not, companies are having to contend with huge tax bills usually after Zimra’s tax audit assessments.
Also most companies that are not conversant with tax issues run the risk of being penalised heavily for errors of omission that include incorrectly recording their revenues.
Although this might be a genuine mistake, the affected might be accused of undermining tax authorities and deliberately under-declaring their obligations.
There is a case of a company that used to contribute about US$5 000 per month to Zimra. It never defaulted on payments as is the case with most SMEs.
However, after a tax assessment, the firm was slapped with a huge tax bill. The company is now considering shutting down as it doesn’t have the wherewithal to continue operating after paying its debt. The fate of nine employees it employs is tied to the resolution of this outstanding issue and, most importantly, the US$5 000 that used to flow into the national purse will ultimately stop.
What is also worrying is that Zimra will always insist on following the law to the letter; there is no room for flexibility in most cases. It must be appreciated that the Zimbabwean economy is currently depressed and many companies are struggling.
Government is also struggling to raise funds to pay its workers.
Liquidity constrains are affecting most companies and indeed the bank statements of most firms are in a sorry state.
Considering the environment that we are in, it would be prudent for the Finance Ministry and Zimra to relook and consider more feasible options through which they can effectively collect taxes while sparing the health of local companies. It seems that the tax authorities have become more efficient in garnishing company accounts.
When tax payers are warned about garnish orders, they should take that opportunity to engage Zimra. Trying to dodge them can have very serious consequences. Many companies have been crippled as a result. Sadly, many business owners are not knowledgeable about tax issues. This needs to be addressed.
Similarly, authorities do not have to be unnecessarily rigid.
Suppose a company that generates about US$10 000 revenue on a monthly basis is slapped with a US$200 000 debt. It may not make business sense for the owner to pay the US$200 000 as that amount is as good enough as capital for a new business venture.
A cursory survey will show that most debts were accumulated by companies in the five-year period to 2014. Many errors were made during this era.
If possible, it would do a world of good if Zimra can slash or even remove debts accrued during such trying times. One can only wish.
But what will definitely be reasonable is to suspend penalties and interest and allow companies to make long-term payment plans that can vary from 5, 10 over even 20 years.
Presently, it is very difficult to get a payment plan of more than 12 months from Zimra.
For example, if a company owing US$200 000 debt is given a 20-year period with which to settle it debt, it will be able to continue with its business at the same time amortising what will be owed to the taxman.
It seems like a flexible arrangement for distressed companies
It will be better for Authority to receive something rather than nothing at all. Zimra is there to serve the nation.
Our economy is not performing well at the moment and I am appealing to our Finance Minister Honourable Patrick Chinamasa and Zimra Commissioner-General Mr Gershom Pasi to really look into this matter. It is surely a delicate issue.
If companies are left high and dry, this will in fact eat into the future tax base and as the base continues to shrink, there will be few companies to collect tax from.
The tax base should not shrink but grow. It is in the best interest of all stakeholders to come up with policies that are favourable to both Zimra and companies.
In addition, Zimra should also increase awareness campaigns to educate companies on how tax system works. Workshops alone are not adequate.
Awareness campaigns can be done in collaboration with audit firms. As auditors go about their business, they can also educate clients on how taxes should be paid, including informing them about submission dates.
Because Zimra wants to meet targets, companies have shut down, customers and suppliers have been affected and to a greater extent even families are affected.
Something urgent needs to be done.
Taurai Changwa is an articled accountant and ACCA finalist. He is managing director of SAFIC Consultancy. He writes in his personal capacity and can be contacted at [email protected], on Facebook page SAFIC Consultancy and WhatsApp number 0772374784.
Online Reporter