ZIMRA lobbies for stiffer tax penalties
THE Zimbabwe Revenue Authority will soon lobby for the stiffening of tax penalties, citing that the current penalty regime is not deterrent enough to compel businesses into voluntary tax compliance, The Manica Post has learnt.
The development comes at a time the country’s tax collector is in a revenue expansion mode, with levels of evasion taking a toll on the country’s tax net. In May, ZIMRA said it was owed over US$2 billion in unpaid taxes and was missing its targets as revenue flows continue plummeting as a result of worsening levels of defaulting and evasion.
In a side interview at the EY Tax Seminar in Harare on Tuesday, ZIMRA board chairperson Mrs Willia Bonyongwe said the authority’s penalties for non-compliance were relatively low and not punitive enough to discourage evasion.
“We believe we are not doing the country a service. Our penalties are very low. We only levy a penalty of up to 100 percent and people still remain lucrative in their businesses since some are reaping massive profits. It is not deterrent enough. In other countries, tax evasion is a serious crime. We want to see how other countries are doing and determine how they are doing it. So we are currently working on how far we can stiffen our penalties and then we lobby to the ministry and Parliament,” she added.
Tax evasion has been one of the major conundrums straining revenue collection, not only in Zimbabwe, but in the region due to weak tax systems.
The authority has noted that most company directors were not depositing proceeds from their operations into company accounts, but into their individual accounts instead, a practice that can only be curbed by putting in place very stringent penalties for offenders.
In countries such as India, penalties for evading tax go as far as confiscation of total profits.
Mrs Bonyongwe also said the authority would not extend the sixmonth moratorium announced by Finance and Economic Development Minister Cde Patrick Chinamasa which lapsed on June 30 for tax registration of small companies with turnover of above US$60 000, but does not exceed US$240 000 per annum.
“People were given ample time to comply. We are, however, grateful to those who responded and we have already given them full exemption,” she said.
ZIMRA is currently seized with expanding the tax net and the moratorium was meant to encourage small to medium businesses to register for tax without accruing backdated arrears and penalties.
The authority is set to introduce the virtual system before year end in a bid to efficiently and cheaply monitor close to a million VAT transactions in real time.
The virtual system is a webbased system which everyone can connect online through mobile phones without the use of fiscal devices which are currently in short supply owing to foreign currency shortages.