The first time a Tax Amnesty was introduced in Zimbabwe was via Part VI of the Finance Bill (No. 2) of 2014. At that time the concept was not yet widespread and uptake was very low. Up to now, I still believe, the reason for lack of uptake was ignorance. I remember writing in another publication encouraging Zimra to publicise the offering. At that time it also appeared to cover only internal tax-related “infractions”.
There was no attempt to explain its application to customs duties, excise duties etc. The next Amnesty in 2017 was slightly better publicised towards its end.
Zimra is yet to release any specific statistics; the assumption is that it did not yield the anticipated results.
Zimra went on to extend a Voluntary Disclosure Scheme (VDS) immediately after the end of the 2017 amnesty. This is set to end on December 31, 2018. The Voluntary Disclosure Scheme is the same as the Amnesty except for the source. The Amnesty was enacted via a Statutory Instrument by the Minister of Finance while the VD Scheme was put in place by the Commissioner General by Public Notice. In fact this was really an extension of the Amnesty programme.
In my opinion, Zimra’s efforts at creating awareness for the VDS were commendable.
However, it is important to note, as alluded in previous articles on this subject matter and by many other writers on this matter that the problem of non-compliance needs to be resolved by a cocktail of measures, not just one.
We still need to take cognisant of the fact that the businesses we want to comply are facing serious financial challenges and therefore may not be able to comply.
In addition, there are issues of lack of trust of the intentions of Zimra. These have not been addressed and are worsened when Zimra does not resolve issues clearly.
For example, I have businesses who applied for the amnesty which ended on June 30, 2018 who are yet to receive conclusive decisions on their amnesty applications.
Whether this is a result of Zimra officer’s indecisiveness, or shortage of manpower at the Revenue Authority, it does not give a good picture to the delinquent tax payer. Ideas start forming in their heads as to the reasons for the delays.
The Ministry of Finance should quickly resolve these Zimra issues if they want to expect any positive results from future amnesties.
The rumour mill is also churning out suggestions that Zimra is considering disallowing amnesty on VAT Penalties and Interest. Apparently there is a Zimra officer who has planted the idea that Section 40 (7) of the VAT Act means any payments made in respect to VAT should always be allocated in the manner set forth in that part.
In relation to recovery of outstanding VAT Section 40 (7) of the VAT Act states that where, in addition to any amount of tax or additional tax which is due or is payable by any person in terms of the VAT Act, any amount of interest or penalty is payable by him in terms of section thirty-nine, any payment made by that person in respect of such tax, additional tax, interest or penalty which is less than the total amount due by him in respect of such tax, additional tax, interest and penalty shall for the purposes of this Act be deemed to be made.
(a) In respect of such penalty; and
(b) To the extent that such payment exceeds the amount of such penalty, in respect of such interest; and
(c) To the extent that such payment exceeds the sum of the amounts of such penalty and interest, in respect of such tax or additional tax.
The above interpretation means that it is impossible to get an amnesty or reprieve in respect to VAT Penalties and Interest as any payments made are required to be allocated to them first.
This is despite the fact that the Tax Amnesty application form clearly lists VAT as one of the taxes for which you can apply an amnesty.
In addition the Finance Act of 2018 also specifically defines the “covered tax” as a tax or duty administered by the Zimbabwe Revenue Authority under the Zimbabwe Revenue Authority Act (Chapter 23:11) that became due and payable before December 1, 2017, but is outstanding as at that date.
Now with Zimra even considering redefining the definition of what is covered or not well after the defaulters have made commitments gives the wrong message to any other defaulters who might be considering coming clean. Tax defaulters are not encouraged to comply at all.
One business associate who is working with a number of SMEs who are heavily indebted to Zimra also intimated that Zimra’s efforts at making it easier for willing defaulters to comply were good, however, the issue of requiring full compliance with the Principal debt certainly needs to be re-considered.
Having a statutory debt over their heads may reduce a company’s growth potential.
As requested before, may Zimra remove the punitive fines for failure to produce import permits and licences?
Detaining the goods until production of the licence is already a punitive measure on its own.
They should consider revising their State warehouse rentals to be in line with the privately owned ones. They should consider that real smugglers do not use legal ports of entry. They use illegal entry points. It is better to pay a fair price for a service (storage) than to pay a fine for a crime which is not committed on purpose most of the time.
The Zimra Voluntary Disclosure programme needs to be reviewed. It remains a very progressive tool for encouraging compliance.
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 Advisor based in Harare. She writes in her personal capacity. Gertrude, a member of ZNCEE ( customs & excise experts) 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