The High Court of Zimbabwe has dismissed with costs an application by PPC Zimbabwe for an order declaring that the Zimbabwe Revenue Authority’s action to institute tax recovery measures against the cement producer is illegal.
PPC was claiming that in 2009 the group recorded a loss of $3, 51 million and in 2013 ZIMRA carried out a tax audit of its accounts and queried the cement producer’s assessed loss.
The loss was reduced to $1,98 million after the parties entered into negotiations and the tax liability for PPC was fixed at $22, 18 million.
ZIMRA demanded payment of interest on the tax due calculated from the date of applicant’s self-assessment for the periods 2009 to 2013.
Although PPC acknowledged its liability for payment of interest on the unpaid tax, the tax row between the two parties emerged after the company denied that such interest should be calculated from any date that precedes the date of the agreement in terms of which the tax concerned is payable.
PPC argued that ZIMRA’s demand for outstanding interest and threat to institute collection measures was unlawful because it has not assessed the amount due in terms of the Income Tax Act and issued an assessment.
In his ruling over the matter, Harare High Court judge Justice Mary Dube, said there was no obligation on the part of ZIMRA to do an assessment of interest payable to a taxpayer.
“The calculations are in tandem with Section 71 (1) and (2) which specify that interest begins to accrue from the time the tax becomes due and payable.
“There was no requirement on the part of ZIMRA to do an assessment of the interest payable by the applicant as an assessment is only required to be done to establish the taxable income.
“Interest is self-calculating and the rates are fixed in terms of statutory instrument. There was no need for an assessment of interest,” said Justice Dube.
Section 71 of the Income Tax Act defines when the “tax liable to be paid” in respect of the relevant year of assessment is due. And Section 71 (2) emphasises the point that interest is only due after an assessment and when the tax due remains unpaid.
Added Justice Dube: “ZIMRA was not obliged to assess interest as envisaged by the definition of the word ‘assessment’ in the Act.
“A taxpayer is obliged to pay interest where there has been no actual interest. There is no need for assessment and notification of interest where an assessment of interest was arrived at by agreement.
“There being no requirement for assessment of interest, I find that there was no legal requirement for an assessment of interest and notification thereof. The threat by ZIMRA to recover the interest outstanding is lawful.”