Firms face $150m tax bite

Zimbabwe Revenue Authority about US$150,9 million.
The arrears, which were unearthed this week, are outstanding payments for this year.

Only US$85,9 million has been remitted so far, while State entities paid US$129,3 million in taxes last year.
Although they are not paying taxes, executives in these companies are reportedly paying themselves high salaries and enjoying other perks.

No comment could be obtained from Zimra to explain what is being done to make these companies meet their statutory obligations, although some are understood to have made payment plans.
The arrears relate to tax obligations in the form of Value Added Tax and Pay As You Earn that are payable to Zimra monthly.

The bulk of the arrears amounting to US$91,6 million relate to VAT remittances followed by US$54,7 million PAYE and US$4,4 million corporate tax.
Hwange Colliery Company owes the biggest amount at US$40,4 million, followed by Zimbabwe Power Company with US$26,6 million, the National Railways of Zimbabwe US$19,8 million and TelOne US$17,3 million.

Agribank, the National Social Security Authority, Grain Marketing Board and Zimbabwe Mining Development Corporation are up to date with their payments.
Zimra is also reportedly owed US$29,4 million in outstanding royalty payments by mines against the US$17,09 million that has been paid up so far.

The royalty arrears were accrued between January and May this year.
Zimplats alone reportedly owes Zimra US$12,3 million in outstanding royalty payments. The firm had made an arrangement with the Government in which it was supposed to remit its royalties in three months.

In terms of pension remittances by parastatals, rural and urban councils, NSSA is owed US$14,9 million.
Parastatals owe US$8,9 million, urban councils US$5,5 million and rural district councils US$456 089,66.

Out of 101 public enterprises that are registered with NSSA, about 58 are paid up while the remaining 43 have not been paying.
In terms of urban councils, only 12 out of the registered 28 are paying while 36 out of 57 registered rural district councils have been remitting their workers’ pension contributions.

The National Railways of Zimbabwe owes the biggest amount of US$2,7 million followed by Zisco US$1,9 million, Air Zimbabwe US$719 784,20, Zimbabwe Broadcasting Holdings US$554 903,64, Allied Timbers US$418 227,97, Zimglass US$413 719,68, Zinwa US$390 043,79 and Zupco Bulawayo US$365 001,09.

Sources told The Herald that there was concern within Government that public enterprises were electing to pay salaries and effect salary increases at the expense of settling their debts with Zimra and NSSA.
They were reportedly spending as much as 50 percent of their revenue on salaries alone, leaving little or no room for tax settlements or pension remittances.
By so doing, they were creating a bigger problem for themselves because the moment they increased salaries they would have to remit more taxes to Government.

However, some had genuine cash flow problems and were besieged by other creditors.
The sources said as a consequence, Government was planning to whip public enterprises into line by rejecting any request for salary increases from those entities that have tax arrears.
Permission would only be granted to those entities that would have paid at least 50 percent of what they owe or those that would have made a payment plan agreeable to Government.

The failure by public enterprises to settle their dues comes against the backdrop of Government failing to collect sufficient revenue to finance its recurrent expenditure.
Part of the recurrent expenditure is in the form of civil servants salaries.

Civil servants have been calling for a salary review but the Minister of Finance, Tendai Biti has been shooting down the calls insisting that Government has no money.
The Principals to the Global Political Agreement had to take a political decision to force Treasury to accede to demands by civil servants for better salaries.
The Finance Minister however made it clear that there would be no supplementary budget and cost-cutting measures would have to be effected in other areas to save money for salaries.

Economic analysts however, believe that Government is partly to blame for the failure by some enterprises to pay their statutory obligations.
“While our economy has stabilised there are a lot of challenges still affecting our companies, the biggest being lack of liquidity in the country and parastatals are not immune to these challenges. In addition, while private companies have the luxury of charging market rates for their goods and services, public enterprises do not have such privileges and inadvertently they will struggle to remit their taxes.

“The problem is Government has been dragging its feet on privatisation and at the same time dictating that these entities charge sub-optimal rates for their goods and services without (Government) injecting fresh capital into the companies. It is a recipe for disaster. Until and unless this is addressed these public enterprises will continue to sink into this debt trap,” said one analyst.
The analyst added that the situation was not just peculiar to State enterprises but the private sector as well.

“Most companies are operating at below 50 percent capacity and wage pressures have been eating into their revenues such that settling of issues such as tax remittance and submission of pension contributions has in some instances been avoided because there is no money,” an analyst said.

Another analyst said there was need to rein in on the huge salary bills at most public enterprises.
“Some of the wage bills that are obtaining at these State enterprises or local authorities are shockingly high. They are even higher than those offered by private companies that are operating at optimum levels.

“This needs to be addressed as a matter of urgency. The (salary) bills have to be brought down to manageable levels say 30 to 40 percent of revenue generated to enable these entities to meet other obligations like tax remittances,” the analyst said.