The fiscal authorities have extended two not so successful tax amnesties to the taxpaying public in the past ten years.
In both amnesties taxpayers were offered a total reprieve on interest and penalties with respect to any taxes paid during the amnesty period.
This means that if you owed $1 000 in principal taxes and paid the $1 000 as agreed with Zimra before expiry of the amnesty period, Zimra would not charge you any interest or penalties for paying the $1 000 late.
If, however, you paid $800 by the end of the amnesty, penalties and interest would still be due for the $200. You would have to apply for waiver of interest and penalties outside the amnesty provisions of which you would be at the mercy of Zimra legislative bureaucracies to get a full reprieve.
From the above analysis, it is apparent that taking up a Tax amnesty offering is not for the heavily indebted and faint hearted. You will have to have a very well funded cash vault to pay up the outstanding taxes within the amnesty payment period, which was only six months during the last amnesty.
In any case, you would not normally find a well resourced business, failing to pay tax obligations and accumulating tax debt.
So this explains why a heavily indebted business would not take up a tax amnesty, unless if the payment conditions were relaxed to periods further than the six months at the onset of the amnesty.
The Fiscal Authorities should not have to ‘extend’ the amnesty period at the end or after the end of a tax amnesty as this will not be beneficial.
They should be reminded that businesses have planning cycles, usually of twelve months; or even longer therefore knowledge of an amnesty extension by a further short period cannot be strategically factored into their business plans.
The Fiscal Authorities need to extend this noble gesture wholeheartedly right from the beginning by being flexible and considering the difficult conditions under which businesses are operating in.
It will be a win-win matrix for both parties, with the taxman recovering outstanding dues and achieving compliance from the current 30 percent. They may consider different amnesty periods for different ranges of debt.
Say for debts up to $1 000 the amnesty payment period will be six months, $1 001 to $10 000 nine months etc. This may increase potential uptake of the amnesty.
The easiest and most sure way in which the Fiscal Authorities could increase uptake of the amnesty is by including the Principal debt under full remission. From my taxation lecturing experience as well as exposure to up-coming organisations, I noted that there were companies which were not aware of VAT on some Benefits to employees until Zimra Audit teams brought up the issue during audits.
Now considering obligations arising this way, it would be not so much to ask if the legislature could consider extending the Amnesty to Principal Amounts such as these. Principal tax obligations such as Pay as you earn PAYE, pose a lot of administrative challenges to employers if they are to pay in retrospect especially given that the Zimbabwean employee is already underpaid.
The employer will be at pains to recover the PAYE from the employees and ex-employees. We also have Customs Duties on Equipment hire charges and other not so common fiscal obligations. It would be encouraging if the taxman would give a full amnesty on these as well.
The amnesties offered so far seem to have condemned international traders who err as unrepentant therefore not deserving of any form of amnesty. The two previous amnesties did not include Customs fines at all; except for those arising from goods already out of Customs control.
The legislation seems to have been made in bad faith because it out rightly excluded those under seizure, forfeiture or any form of Zimra control. So indirectly it discourages compliance hear no evil see no evil. We are not advocating rewarding of Smugglers but Zimra should be able to distinguish between seizures due to outright smuggling and other lesser crimes and only maintain fines on outright smuggling cases.
Then there are the notorious Customs fines notably the $2 000 one for failure to produce import licenses and permits during importations and exportations. Even if you produce the document afterwards, Zimra will still go on to fine you without any regard for the circumstances for failure to produce the document.
If there is to be another amnesty, it should provide for scrapping of these fines during the amnesty period. Their sole purpose now appears to be revenue generation rather than encouraging compliance.
A successful tax amnesty will mean that Zimra will have fewer delinquent taxpayers to deal with. Research into normal taxpayer behaviour has shown that most taxpayers are willing to comply if conditions are “right”. The Fiscal Authorities should then consider making the conditions “right”, thereafter declare war the few belligerent taxpayers and unleash their entire wrath on them instead of antagonizing all taxpayers. Of course the Author realises that there are other factors to consider like the general economic operating environment, ease of paying taxes etc. which Zimra and the Ministry of Finance may not be able to change on their own, but with other economic players.
All in all, a Tax amnesty is truly progressive and could achieve increased tax debt collections and also increase the taxpayer base with both new and old taxpayers increasing their compliance levels. Only a little flexibility is required of the taxman and his principals.
Disclaimer: This article is not meant to create a consultant/client Relationship. Readers are advised to consult their Consultants for specific advisory services.
Gertrude Mawire is a Fiscal Compliance and Investment Analyst based in Harare. She writes in her personal capacity. Gertrude holds an MSc. in Finance & Investments (NUST) Bachelor of Business Studies (UZ), IOBZ Diploma various other Certificates. She can be contacted on firstname.lastname@example.org