The poor response to the first Tax Amnesty extended to taxpayers in 2014 appears to have set a standard for all future Tax Amnesties in Zimbabwe.
A preliminary indication from an informal survey conducted by this author indicates that the amnesty dispensation, which ended on 30 June 2018, appears to have failed once again.
The dream of collecting outstanding dues and achieving increased compliance by the non-compliant Tax payers remains just but a dream for the Zimbabwe Revenue Authority.
While there seems to be not much worldwide disagreement that this tool is progressive, there seems to be no consensus as to whether it is progressive for the Zimbabwean situation.
Tax Amnesties have failed to succeed in developed countries like Germany and Australia, which are considered better equipped to implement projects.
Australia expected $4 billion but only got a paltry $30 million of the outstanding dues during a recent amnesty offering.
However, the phenomenal results achieved in countries like Indonesia which raised Rupiah 7 billion and Argentina Peso 117 billion against much lower targets leads scholars and policy makers alike to believe that Amnesties are indeed progressive.
Therefore, it is prudent to continue to explore their use by our local fiscal authorities.
Scholars have proved through studies that certain conditions need to be in place for these Tax concessions to be successful. The first of these is adequate awareness.
In Zimbabwe we have seen two Amnesties coming and going without much awareness getting to the appropriate constituencies.
ZIMRA themselves have acknowledged that they are not connected with the informal sector, which I believe would give better returns for an Amnesty in terms of administrative compliance.
Due to the informal nature of most small to medium businesses SMEs, it is difficult for ZIMRA to locate them during physical client visits.
However, ZIMRA could have been more innovative by for example, putting up huge billboards at informal sector business sites for example kuMbudzi, Glen View Furniture Market etc.
They could have even gone further to temporarily station officers at these sites to give and provide answers to traders with no requirement for immediate compliance.
This could have been implemented at the onset of the amnesty in December 2017. As I write, ZIMRA could be having more SME taxpayer details on their books by now.
The use of technology to access taxpayers is prevalent the world over. It is unfortunate though that the majority of SMEs in Zimbabwe lag behind on technology use, ZIMRA therefore do not have much leeway at electronic access to these SMEs.
In addition, the use of public media by ZIMRA is not as extensive with only a few adverts appearing on local TV during the last amnesty. Even the timing of the ZIMRA adverts was bad only starting to come when only three months before the end of the payment period.
This gave businesses very little time to take stock of their Tax affairs and make appropriate decisions. Even the ZIMRA social media platforms like Twitter, Facebook were not abuzz with Tax Amnesty talk as would have been expected of such a noble gesture.
This shows that there was an intrinsic flaw to the way in which it was communicated. Then again there is very little communication in vernacular languages from the Authority to the public.
The well established corporate companies usually have structures in place which enable them to be aware of an amnesty as soon as it is offered.
The issue with them is capacity to take up the offer. Many companies are cash-strapped and cannot afford to pay tax arrears especially over such a restricted period as the six months offered in the last amnesty. Some are either on the verge of collapse or have closed down completely.
Taxpayers might have looked at the amnesty as bait by the Fiscal Authorities for them to come forward and then penalise them afterwards. While this was clearly not the intention, going forward ZIMRA and Ministry of Finance and Economic Development may need to make sure that measures and guarantees regarding the use of information gained are in place before offering an amnesty.
Taxpayers need to know that there is security and confidentially of information divulged during an amnesty period.
In Nigeria, for example their VAIDS Amnesty legislation provided for prosecution of tax officials who abused information garnered during the amnesty after the amnesty.
For example, only those suspected defaulters who did not respond to the amnesty would be subjected to rigorous audits and prosecution after an amnesty period.
Amnesty respondents would be given a breathing space before they are subject to audits. Of course Nigerian IRS had done their groundwork before introducing the amnesty. They have a database of all suspected defaulters.
Given the circumstances under which our amnesty was introduced, it is not clear if ZIMRA have such a database.
In Zimbabwe, the well established corporate companies might not have any issue with how the information they provide is used after the amnesty as proper due diligence will have been taken before taking up the amnesty offer.
However, the smaller business may not be that organised and taking up an amnesty offer unprepared may give them unnecessary exposure to ZIMRA “harassment” after the offer period. I have had clients who have overstated their tax obligations due to lack of knowledge and thereafter struggle to prove the correct obligation because they do not keep proper records thereby being at the mercy of ZIMRA.
That having been said, ZIMRA reported a 6,14 percent increase in revenue over the target in tax contributions over the first quarter of 2018.
Could this be partly attributable to the Amnesty? Now that the Amnesty has ended, we expect ZIMRA to publish the Amnesty specific statistics so that we confirm if it succeeded in reducing the $4 billion tax arrears which I will call financial tax compliance, but what about the administrative compliance? Are all Taxpayers now on record with ZIMRA?
For administrative tax compliance, an amnesty is a short term emergency measure; in the long term tax compliance can only be achieved by improving the ease of paying taxes index. Let’s explore how our local fiscal authorities can improve the ease of complying with Tax and Customs requirements in future articles.
Disclaimer: This Article is not meant to create a consultant/client Relationship. Readers are advised to consult their Consultants for specific advisory services.
About the author: 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