daniel chigunwe
Oliver Kazunga
THE tax dispute between Delta Corporation and the Zimbabwe Revenue Authority (ZIMRA), rages on with the country’s largest brewer contesting the tax that the revenue collector claims is now at US$73 million.
In a trading update for the third quarter ended December 31, 2024, Delta Corporation said it is contesting the tax assessments issued by ZIMRA for amounts that they consider to have been payable exclusively in foreign currency.
Delta said in November last year, it received additional tax assessments adding to those assessed in 2022, and thus bringing the disputed figure to US$73 million.
In November 2023, Delta disclosed that ZIMRA imposed extra income tax and Value Added Tax assessments along with penalties and interest totalling US$54,7 million, which the firm had initially settled in local currency.
“The company is contesting the tax assessments issued by ZIMRA for amounts that they consider to have been payable exclusively in foreign currency.
“Additional assessments were received in November 2024 adding to those assessed in 2022, to bring the disputed amount to US$73 million, which covers principal tax, penalties and interest for value added tax and income tax for periods 2019 to 2022,” said the brewer.
“The assessments do not consider the local currency payments made at the relevant time, which have since been debased through inflation and currency depreciation.
“Adverse judgements have been made by both the High Court and the Supreme Court, although there are appeals and new cases at various stages in the courts including the Constitutional Court and the Zimra appeals processes.”
As at December 31, 2024 in line with the ‘pay now, argue later,’ principle and pre-existing payment plans Delta whose business units include the Lager Beer — Sparkling Beverages — Sorghum Beer — Schweppes Holdings Africa — and Nampak Zimbabwe said, it had paid a total of US$9,2 million.
“We believe any revisions to the payment plan will be rational, with due consideration of the financial health of the business and the fact that the principal amounts were fully paid in legal tender at the relevant periods, based on the best available interpretation of the legislation,” it said.
“The group holds a significant amount in treasury bills receivable from the Government, which could be considered in the settlement of any tax liabilities that may finally be determined.
“Management continues to engage with ZIMRA while appealing some legal and factual issues of the assessments and the judgments, with guidance from tax experts and legal counsel.
“These assessments have a material impact on the group’s operations, if they materialise as per the extant assessments,” said the company.
It said the ambiguities in the tax legislation are pervasive, thereby creating risks of further disagreements in interpretations and application to current taxes.
At this stage, Delta said its board cannot estimate the likely outcome or timing of the resolution of the above matters, adding that it considers the current accounting treatment and disclosures of the assessments and the amounts paid so far to be appropriate.
During the quarter under review, the group’s revenue improved by 1 percent compared to prior year and grew by 7 percent for the nine months.
This, Delta said reflects the mixed volume performance across its business units, with part of the revenue increase in soft drinks being related to the sugar tax induced price increases.
“The proportion of US dollar sales varied month-to-month in response to the exchange rate and changes to the route to market but remained above 70 percent for the year.
“The total sugar tax assessed for the period February to December 2024 amounted to US$31,2 million covering both sparkling beverages and cordials,” said the group.
In the outlook, the group said the operating environment in Zimbabwe remains complex, influenced by policy changes and currency instability.
The beverages sector faces further challenges relating to uncompetitive retail prices arising from high input costs and taxes which attract lower priced imports from the region and policy driven changes to the route to market.
“The implementation of policies that promote the stability of the local currency and access to foreign currency through formal banking channels would improve the operating environment.
“Despite these challenges, the business remains well positioned to seize any opportunities from increased consumer spending. Our focus remains on leveraging on activities that generate aggregate demand and positioning the business for future growth,” said Delta.
Bongani Ndlovu