adminThe companies are as a result using some of the tax money as working capital. According to a story we published yesterday more than 120 companies in Bulawayo have been dragged to court for not remitting taxes to Treasury. Registered companies and organisations are required by law to remit Income Tax and Value Added Tax returns to treasury every month through the Zimbabwe Revenue Authority.
The situation obtaining in Bulawayo likely mirrors challenges facing other companies throughout the country which means Government is being prejudiced of millions of dollars every month by organisations that are failing to comply with the tax laws. The defaulting companies have blamed low production for their failure to meet their financial statutory obligations. Many of the companies said they were making losses thereby making it difficult for them to pay taxes. The situation, the companies said, was so bad that some of them were even failing to pay wages and salaries.
The companies are obliged by law to pay Government taxes regardless of whether or not they make profits. The defaulting companies are in fact making the situation worse for themselves because at the end of the day they will still be required to pay the outstanding amounts with penalties. The Zimra penalties are 100 percent of the outstanding amount so defaulting is very costly for companies. Government relies on taxes to meet its day to day expenditure so there is no way companies can be exempted from paying taxes.
The disturbing reality on the ground, however, is that most of the companies might be forced to close shop after failing to pay the huge amounts in tax arrears. It cannot be disputed that many companies are operating below capacity and as such are finding it extremely difficult to meet their financial obligations such as paying wages and salaries, electricity, telephone or water bills and taxes. There is therefore urgent need for the Government to urgently review the 100 percent Zimra penalty imposed on companies that default in paying taxes which in our view is too punitive given the prevailing economic environment. The courts when handling cases of companies failing to remit taxes should not lose sight of the fact that the failure to pay taxes in most cases is not deliberate. Many companies are really struggling to make ends meet and that should be taken into account. It will not help the situation for courts to order the auction of assets of defaulting companies as this will result in the demise of many companies. There is need for Government and the private sector to engage each other in order to find the best way forward.
The defaulting companies should continue to operate so that Government can continue receiving taxes. The closure of companies means the shrinking of the revenue base for the Government so it should be avoided at all costs. We want to make it abundantly clear that we do not condone the non- remittance of taxes to Government because it cripples government operations and by the same token we are against actions that force companies to close. We want to once again implore the Government and the private sector to engage each other and find the best way forward to address the failure by companies to remit taxes.
Online Reporter