VID TEST FOR ALL CARS . . . Parliament moots annual fitness checks for private cars Econet, Zimra in $300m tax scam
Flooded river claims seven lives
PARLIAMENT has recommended to the Ministry of Transport and Infrastructural Development that all cars must be inspected yearly at a cost of $50 per unit, as part of the commercialisation of the Vehicle Inspectorate Department meant to raise $126 million annually.
At the moment, inspection for fitness is limited to public service vehicles at a cost of $25 and $20 for heavy and light vehicles respectively, in line with Statutory Instrument 134 of 1998. Private cars are only inspected at VID when they are involved in accidents or when there is suspicion that they have defects.
Although such executive decisions are normally taken by the responsible ministry, parliament through its Portfolio Committee on Transport and Infrastructural Development has recommended the idea. The parliament used its oversight function, which according to the Standing Order of Parliament Category (c) states that the committee shall; “monitor, investigate, inquire into and make recommendations relating to any aspect of the legislative programme, budget, policy or any other matter it may consider relevant to the Government department falling within the category of affairs assigned to it, and may for that purpose consult and liaise with such department.”
In an interview, the chairman of the committee, Cde Dexter Nduna (Zanu-PF, Chegutu West) said this was a gap where Government can raise money.
“As a committee we are proposing that VID must inspect all motor vehicles in Zimbabwe, be they black on yellow plates or red on white plates which are private and public service vehicles. There are approximately 1,5 million vehicles that are on our roads and they have not been inspected, in fact a good number of them have not been inspected with a view of reducing road carnage,” he said.
Cde Nduna said Statutory Instrument 34 of 1998 allows the Minister of Transport and Infrastructural Development to inspect public service vehicles while another statutory instrument can be put in place that there be a provision to inspect all vehicles to see their road worthiness. He said hence VID could charge as much as $50 for vehicle inspection on all cars.
“If the VID is commercialised, there is going to be $50 levied for all annual inspections for private vehicles, and with the vehicle population in Zimbabwe VID can easily raise revenue to the tune $126 million. It can use $40 million for recapitalisation and declare $60 million to the Government,” he said.
Cde Nduna said the money will add onto the $5 million the department was raising through Learners’ Licence Tests, $6 million from Drivers’ Licence Tests and $25 million from public service vehicle inspections. The move will raise the revenue by 600 percent to $126 million.
However, in an interview, Transport and Infrastructural Development Minister Dr Joram Gumbo said the idea was noble although his Ministry was still to deliberate on the issue.
“I have not received any communication yet but maybe the move is a noble one if done correctly and through the right channels. It should come to Government formerly and be discussed,” he said.
The committee also suggested that there should be computerisation and integration of the transport management systems linking driving schools, VID, Zinara, Zimra, Central Vehicle Registry, Traffic Safety Council of Zimbabwe and Zimbabwe Republic Police.
“In Government we have moved to have an electronic system whereby VID, Zinara, CVR and Zimra will come as one and officials can be able to check the status of a vehicle at one go, one can check if a vehicle is registered, free of debts with Zinara and even the police can see if there are any offences,” said Cde Gumbo.
Merging of Zinara and VID will see the two organisations leveraging on synergies with quick wins in activities such as enforcement of laws regarding overloading, unlicensed vehicles and drivers, fuel levy, unroadworthy vehicles and garage inspections, to name a few.
Nonetheless, if the proposals see the light of the day, there will be an increase in the number of fees motorists have to pay. At present motorists pay Zinara Vehicle Licensing fees of between $20 and $300 per quarter depending on the weight of the vehicle. To pay for the licensing fees, motorists also need to pay insurance with the cheapest pegged at $36 per quarter. In adddition, they pay the same parastatal between $2 and $10 for tollgates when using the country’s major highways depending on the weight of the vehicle. Motorists also pay a minimum of three cents per litre of fuel they buy levied as Carbon Tax. Those with car radios are supposed to pay an additional minimum of $10 for radio licence to ZBC per quarter.
Motorists are also mandated buy triangles, reflectors and extinguishers.
There are also plans to introduce tollgates in urban areas to raise money for road repairs and construction. to fire TELECOMMUNICATIONS giant Econet Wireless and Zimbabwe Revenue Authority bosses allegedly connived to help the company evade taxes and externalise cash — a scandal involving US$300 million.
The allegations are contained in a Zimra forensic audit report compiled by HLB Zimbabwe Chartered Accountants signed off in October 2016. According to the report, Government could have lost about US$300 million in revenue between 2009 and 2013 after Econet allegedly imported dutiable goods without paying taxes.
To promote ICTs, Government allowed mobile network operators to import base stations duty-free. Econet allegedly took advantage of the exemption to smuggle dutiable goods which the company allegedly marked as “base stations”. The company also allegedly externalised foreign currency by over-invoicing through its Mauritius-based sister company, Econet Capital.
Zimra board chair Mrs Willia Bonyongwe confirmed that forensic auditors had raised the red flag and investigations were underway.
“Yes, there were observations to that effect and the forensic auditors recommended that we investigate the issues of overinvoicing, transfer pricing and customs duty evasion, among other things. I can assure you that the board will act on all issues raised by the forensic auditors and we actually have already started doing so. But some cases are more complex than others, requiring more time and more technical advice and investigations. And then the fact that Zimra officials involved are going through disciplinary hearings is another process altogether which affects the speed of implementing the audit findings.”
Mrs Bonyongwe said individuals and companies implicated in the report should “get an opportunity to clear their names to the public and to their stakeholders because the allegations are quite serious and Zimra should have followed them up conclusively.”
The report states that Econet Wireless hired clearing agent Mr Edward Matambanadzo to process its goods through his Paul Edwards Shipping Company (Private) Limited. Auditors stumbled upon the scandal as Mr Matambanadzo battled to get Zimra to pay him for providing them with information on Econet’s alleged shenanigans.
Mr Matambadzo’s lawyers, C Nhemwa and Associates, wrote to suspended Zimra Commissioner-General Mr Geshom Pasi on 7 February, 2014 raising the allegations but the matter was not pursued.
The letter reads, “Our client has instructed us to bring to your attention that in the process of carrying out its business of customs and freight forwarding, it came to discover that Econet Wireless Limited was fraudulently prejudicing the revenue authority of huge sums of money through illegal declarations and fraudulent clearances using a number of clearing agencies, including our client’s Paul Edwards Shipping Company (Private) Limited.
“On discovering this, our client approached your organisation with the relevant information and provided documentary and audio evidence which we believe has been useful in collecting revenue from Econet Wireless. Apart from SEVEN people from Gokwe including two children drowned in Mudzongwe River in Mudzongwe village under Chief Njelele within a space of three days, Midlands Civil Protection Unit has confirmed.
Four women from Mudzongwe village under Chief Njelele in Gokwe South drowned on Tuesday while trying to cross a flooded Mudzongwe River and another man from the same village drowned on the same day while coming from Gokwe.
Minister of State for Provincial Affairs for Midland Province Cde Jason Machaya, who is part of the Midlands CPU confirmed the incidents saying two other children from Mukwiri village drowned on Sunday while their mother was working in the fields.
He said five people, three women and two men, from Bariwa village under Chief Njelele were marooned while they were working in the fields following the incessant rains.
“I can confirm that seven people have drowned in Mudzongwe River since Sunday following a heavy downpour that left the river flooding. Four women drowned on Tuesday while on their way to Gokwe Town while another man drowned while trying to cross the flooded river after receiving his fertiliser under the Presidential Input Support Scheme. I am also informed that five people have also been marooned in Bariwa village but a helicopter was sent to rescue them,” he said.
Minister Machaya said the Midlands CPU has secured food and clothes for more than 100 villagers under Chief Sayi in Gokwe South who were last week left homeless after close to 20 homes were swept away by the incessant rains, while hundreds of livestock were also killed by floods that hit the area last week. He said the rains have also destroyed some of the crop in the area.
“I received a report last week that there were 16 households that were destroyed by the incessant rains under Chief Sayi in Gokwe South. We are still compiling information to find out how many people were affected. I am informed that the situation on the ground is terrible and the livestock were also killed by the rains,” he said.
Minister Machaya said the incessant rains also left a trail of destruction in Zhombe where they washed away Mayoka Dam wall which was supplying water to a 70 hectare irrigation scheme.
“In Zhombe we have a dam wall which was also washed away following the incessant rains. The dam was irrigating more than 70 ha under Mayoka Irrigation Scheme,” he said.
Minister Machaya said a full assessment of the province on the infrastructure including schools, dams, bridges and houses that was destroyed by the rains, was still to be conducted.
prejudicing the revenue authorities, Econet Wireless was also illegally externalising foreign currency through overinvoicing using a sister company registered in Mauritius and this matter has been reported to the Reserve Bank of Zimbabwe. We are instructed to inquire from yourselves as to what amount has been recovered from Econet Wireless as our client believes the prejudice for the revenue authority is in excess of three hundred million dollars (US$300 000 000.)” Mr Pasi is directly implicated by auditors. “Apparently, the Commissioner-General (Mr Pasi) also acted corruptly (showing favour to a client) by not causing an investigation against Econet to be carried out,” reads part of the audit report.
Zimra, through post-clearance conducted in 2013, discovered that it could have been prejudiced of US$15 million by Econet.
On 3 December, 2013, Zimra wrote to Econet saying, “A post-clearance was carried out on some Econet Wireless ‘base stations’ importations which were cleared through Harare Airfreight Zimra office and Beitbridge Boarder Post.
“The audit revealed gross anomalies in the clearance which resulted in Zimra being prejudiced of USD15 884 943,46 in Customs Duty and VAT.”
Quizzed on the alleged tax anomalies by our Harare Bureau, Econet Wireless executive assistant to the group CEO Mr Lovemore Nyatsine said Zimra had advised the company of its intention to garnish US$67,9 million, which the mobile network operator then challenged in court.
“The penalty of US$47 million that Zimra had imposed was set aside by the High Court. We imported base stations in exactly the same manner that our competitors did. Zimra sought to charge duty against Econet alone retrospectively without charging the same duty against our competitors. We have objected to that discriminatory treatment and our case is pending in the courts.”
Auditors explained that the anomalies were a result of Econet’s misclassifying of single components/units or parts of base stations as complete base stations. HLB Zimbabwe Chartered Accountants said evidence presented by Mr Matambanadzo suggested that Econet imported 59 582 base stations when the actual number of base stations it owned was less than 2 500.
“This points to the fact that the 57 082 which were imported by Econet were classified as base stations when they were not base stations hence the 57 082 were imported duty-free to the detriment of the fiscus,” reads part of the audit.
The auditors said the 57 082 items were imported by Paul Edwards Shipping Company. Mr Nyatsine however, dismissed the allegations as false.
“Whoever did the audit for Zimra would have counted each base station component as though it was a complete base station hence the ridiculous quantity of base stations we are alleged to have imported. The number of base stations we own correspond with the number of base stations we imported.”
Forensic auditors further unearthed that Econet could have externalised US$6,3 million through a scheme involving transfer pricing within one month in 2009. The matter was reported to the Reserve Bank of Zimbabwe which then conducted investigations as captured in a letter written by the chief inspector of the Exchange Control Inspectorate on 17 June, 2016.
In the externalisation, it is alleged that Econet would overstate the prices of components it was buying from its sister company in Mauritius, thereby allowing it to move millions of US dollars out of Zimbabwe. The audit report shows that on 23 October, 2009, Econet Wireless Zimbabwe bought a PDH Microwave from Econet Capital for US$2 398 425. Auditors said the equipment was actually valued at US$1 343 231 by ZTE, implying potential externalisation of US$1 055 194 via that transaction.
On 27 July, 2009 the company bought “various items” from its sister company for US$9 153 400 when the goods were really valued at US$5 117 472 — a difference of US$4 035 928.
Auditors said, “This potentially resulted in hundreds of millions of United States dollars which could have been externalised by Econet through the modus operandi illustrated above the exact quantum of which can only be determined by carrying out a full-scale audit on imports by Econet Wireless Zimbabwe — a posit that was not taken by Zimra executives. Zimra could have potentially suffered financial prejudice in that by inflating the values of assets imported, the value claimed in respect special initial allowances would also be inflated thereby understating profits and the corporate tax thereon.”
Econet’s Mr Nyatsine also dismissed these allegations, saying the matter was investigated and the firm had not been censured.
But HLB Zimbabwe Chartered Accountants insisted the matters raised required thorough investigations. Zimra did not carry out a full-scale investigation because - according to a letter by the tax collector’s director of legal and corporate services, Mrs Florence Jambwa on 23 July, 2014 — the allegations were not supported by facts “and as such we were not able to take any action on them”.
Auditors discorved that Mr Pasi had ordered Ms Jambwa to write the letter, possibly to cover up the scam. Auditors’ interviews of Zimra loss control divisional heads showed no investigations into Econet’s dealings had ever been conducted. The auditors said the issues raised by the whistle blower issue, Mr Matambanadzo, should be fully investigated.
They also recommended that appropriate action be taken against Mr Pasi for “acting corruptly”; Ms Jambwa for signing a letter with contents which misrepresented facts; Mr Tichawona Chiradza (commissioner, investigations and international affairs) for facilitating the letter which misrepresented facts; and Mrs Anna Mutombodzi (commissioner customs and excise) for failing to take action after receiving information from the whistle blower. Mr Pasi could not be reached for comment.