Darlington Musarurwa Business Editor’s Brief
FOR a country that has every reason to invoke every law in the book to mobilise resources that are desperately needed to set the country’s economy on a sustainable growth path, it is shocking that tax evasion has become a lifestyle.
There are legions of groups, particularly in the informal sector, that still remain outside the tax bracket.
Well, some say in life nothing is certain except DEATH and TAXES, but in Zimbabwe only death is certain. Taxes? Maybe.
Last week, Small to Medium Enterprises and Co-operative Development Minister Sithembiso Nyoni said an SME survey conducted in 2012 revealed that more than US$7,4 billion is circulating in the informal sector.
Instructively, Bankers’ Association of Zimbabwe announced a fortnight ago that it had launched a survey to gauge how much is circulating outside the formal banking channels.
While the amount of money outside the mainstream economy is subject to conjecture, it is generally agreed that there are substantial amounts that are not being captured by the formal systems.
But the taxman, who is supposed to be the lead actor in scrounging for these precious dollar bills in every nook and cranny, especially at a time when direct investment and lines of credit have been difficult to come by, continues to shy away from addressing this sore anomaly.
In fact, a study conducted by the African Forum and Network on Debt and Development (AFRODAD) in 2011 railed against the Zimbabwe Revenue Authority (Zimra) for failing to effectively monitor business transactions.
For its part Government has made an effort to provide enabling legal tools that could assist local revenue authorities in formalising operations of the informal sector and also augment revenue collection from this key constituency.
Interventions that have been made thus far include: the introduction of fiscalisation through the gazette of Statutory Instrument 104 of 2010 and the floating of two tenders meant to install a cargo tracking system and electronic seals, including a data collection server infrastructure.
Efforts were also made to reform the local tax regime after Government published the Income Tax Bill in December 2012. The Bill was designed to repeal the Income Tax Act that was enacted in 1967.
But it is the lethargy of the taxman that is worrying and suspicious.
Introduced on June 8, 2010, fiscalisation was meant to introduce electronic fiscal devices (EFDs) — machines designed for use in businesses for efficient management controls in areas of sales analysis and stock control system — such as electronic tax registers (ETRs), electronic fiscal printers (EFPs) and electronic signature devices (ESDs).
In essence, these devices are designed to capture all sales information and automatically re-route it to the tax authorities, who, at an instance, are able to see how much they are owed by the enterprises.
The first phase of the project was supposed to cover big businesses, while the second phase was targeted to cover both small and medium-scale enterprises.
Predictably, this met fierce resistance from businesses. It now seems the project has been aborted. This compares to our regional peers Tanzania who embarked on the same project just about the same time that we also introduced ours. Ironically, with effect from May 15 this year, Tanzania will be embarking on the second phase of its fiscalisation project.
Tanzania Revenue Authority (TRA) now expects to collect $370 million (600 billion shillings) a month from the current $250 million (400 million shillings) from the expanding use of the electronic tax register.
TRA is targeting more than 200 000 taxpayers that have been evading the authorities.
It is believed that when Tanzania introduced ETR machines, tax collection improved by 9,6 percent for the fiscal 2010 to 2011, and 23 percent for 2011 to 2012.
TRA Director for Education and Taxpayer Services Richard Kayombo was recently quoted in the Tanzanian Press as saying it is now imperative for consumers to ask for fiscal receipts even for the purchase of a needle.
“We are now embarking on the massive campaign for people to demand receipts for anything they buy. Even if it is a beer, a soda or a needle worth 10 shillings, get the receipt . . .
“We ask Tanzanians not just to demand receipts, but to make sure they are ETR receipts and they depict the correct amount paid,” said Kayombo.
Businesses that now sell anything without issuing an ETR receipt will risk being fined $1 900 (three million shillings) on the spot or twice the amount of the tax evaded, whichever is greater.
But it will be folly to assume that the implementation of this system was seamless. It definitely wasn’t all about Valentine’s Day in the week leading to February 14 for the East African country as businesses were closed in various parts of the country, including the very busy Kariakoo shops in Dar es Salaam, Iringa, Songea and Tabora, among others.
The businesses claimed that they couldn’t afford to buy the devices.
In Zimbabwe, however, Government spent more than $10 million in VAT rebates for companies that had complied with the law, but, again, this seems to be money spent in vain.
It is a similar jaw-dropping tale with the mulled electronic cargo tracking system. Though considered in 2010, efforts to roll out the projects are now being rolled out this year, a good four years later.
In the same year, another East African economic powerhouse, Kenya, completed the implementation of its Electronic Cargo Tracking System (ECTS).
Currently, no cargo under customs control is allowed to transit Kenya without appropriate tracking devices installed.
Kenya Revenue Authority has made it imperative for importers, exporters and clearing agents to install electronic seals on cargo.
For the project, KRA had to rope in Hi-G-Tek and Navisat Telematics.
However, in Zimbabwe we have local companies that can ably supply these systems.
We continue to hear “heroic” tales of how cargo, purportedly destined for other countries in the region, is offloaded in some local suburb, including tales of how cigarettes are transported across borders in tankers to regional countries where there is a lucrative market.
If all these loopholes are closed, significant amounts can accrue to the taxman.
But there are some quarters that claim that a proper system will have the effect of prejudicing a host of officials – big and small – who are corruptly benefitting from the system.
Although this allegation has not been proved, it cannot be disproved either. These are some of the low hanging fruits that can be achieved in the short term only if the willpower is there.
There is more than meets the eye — a lot of briefcase entrepreneurs and “bush” mechanics are making a killing. It is, however, not about those making a killing.
Paying tax should be an inescapable obligation to anyone who is earning income.
It is a very dangerous and short-sighted undertaking to only burden those employed in the formal sector. Musicians, among a host of other artistes, are some of the people that are having it easy from Zimra. The current tax system is at best ignorant and at worst lax when it comes to collecting dues from local musicians.
Some musicians charge as much as $3 000 for a single show, while those that are prominent charge anything above $10 000 per show.
Well, being a money-spinning sector, no one would begrudge musicians for pocketing such hefty fees after paying a reasonable amount to the national purse.
It’s ironic that countries such as the United States of America, boasting of a Gross Domestic Product of US$16 trillion, constantly frisk its truant celebrities that intend to evade tax, but a country such as Zimbabwe that desperately needs resources, seems to be non-committal. The ball is squarely in our court.
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