A guide to cheating ZIMRA

27 Apr, 2014 - 00:04 0 Views
A guide to cheating ZIMRA Zimra Commissioner General Gershem Pasi

The Sunday Mail

Zimra Commissioner General Gershem Pasi

Zimra Commissioner General Gershem Pasi

Edwin Mwase
As tax evaders continue to dodge the taxman, often working in cahoots with insiders, two officers within ZIMRA break ranks and ask for a tell-all meeting with the relevant minister. Two Zimra officers have approached The Sunday Mail with information on a catalogue of tax-evasion tactics being used to undermine the revenue collection process.
They speak on condition of anonymity for fear of victimisation.

Detailing an assortment of evasion methods, including cases of garnishees that were allegedly reversed by senior managers after being bribed by tax evaders, they explained that the rot went right to the core of Zimra. We quote them verbatim in some instances.

Their testimony suggests Zimra is potentially losing hundreds of millions of dollars not only to internal corruption but to a number of elaborate evasion tactics.

There seems to be an intricate gravy train operated by Zimra officials, police officers, importers and senior Government officials who are subverting revenue collection systems at the country’s borders.

In exchange for looking the other way, Zimra officials, working together with police officers, are receiving substantial bribes.
While civil servants are struggling to make ends meet, many Zimra officials are said to be living lavishly with reports of Zimra officers driving vehicles and owning homes that they could not afford on their modest salaries.

“It is very difficult to root out corruption here at Zimra because it goes to the very heart of the organisation, from the border post right to management. It is a cancer that cannot be removed without killing the patient. For example, at the border we have what we call “hot goods”. So if you have something you do not want to declare for whatever reason you pay the driver of the bus two hundred rands and just leave it in the bus. The Zimra officer will just walk in the bus or look in the trailer and turn a blind eye. The driver pays and off you go. The police are also in on the game. Even if someone is caught red-handed they just have to pay and they will be let go. So in that case who will arrest the police? It’s a hopeless situation.

“There is a serious problem in terms of tax clearance. All you need to do to get it is just pay. We deal with many accounts that when you look through them you find that their tax affairs are not in order but still they got tax clearance. The culture of corruption is ingrained, there is a culprit at every level.

“In those cases when officers submit an audit report to supervisors incriminating an individual you often find that the report is manipulated. We have cases of officers refusing bribes, but when they report the culprits to superiors, the superiors pretend to be taking up the issue. The officer will later realise that the boss has been given that bribe. Such cases are not uncommon but it is impossible to report to anyone since the person you are reporting could actually be in the corruption chain. I think the Ministry of Finance needs to have an independent whistle-blowing system and protections built in to ensure that those who leak information are protected and allowed to carry on at their job. Even better would be a situation where if you report to the ministry you get a percentage of the recovered tax. Such a system would make corrupt managers insecure since they would be afraid to manipulate a file as a junior officer would have every motivation to expose the fraud.”

Zimra officials working at the border have developed well-connected syndicates operating in partnership with clearing agents and importers.
The importers do not deal with the Zimra officials directly, but the clearing agent will act as a link between the importer and the officials.
There are different tariffs levied on different goods. In some instances, the clearing agent acting on behalf of the importer connives with the Zimra official to conceal the actual identity of the consignment to be cleared at the border.

When the Zimra official carries out the inspection, he will then endorse that false declaration so that highly priced goods are undercharged.
The syndicate will then split the difference.

Smuggling is also done by the importers and the Zimra officials directly. This is accomplished through undervaluation of goods by issuing false purchasing invoices which are endorsed by the inspecting Zimra official.

In other cases, under-declaration of the consignments’ quantity results in undercutting of relevant levies when the final issuance of receipts is done.

An individual transacting a business deal must account for various taxes such as income tax, value added tax (VAT) and pay as you earn (PAYE).
Tax evaders working in cahoots with Zimra officials understate the business’s true income or use doctored invoices. They connive with Zimra officials to undercut the tax bill so that they pay very little of what they owe.
The Zimra official will then get a kick-back for his services.

In other cases, Zimra officials manipulate the value added tax regime. This includes the manipulation of the output tax (what a business is levied when it is transacting) and input tax (what is rebated when a business buys).

The system is then duped when businesses intending to evade taxes acting in partnership with Zimra officials then create fictitious input tax invoices with enormous amounts, which then trims the overall tax paid by an individual.

There are also instances where tax cheats create several small fictitious companies, which then feed into one big company which in turn claim input taxes on behalf of these small companies.

Zimra will now be obliged at law to rebate these companies as they will be now in a refundable state.
This prejudices Zimra as there would be no outright cost that would have been incurred simply because that particular business would have just created invoices with its small fictitious companies meant to manipulate the taxing regime. Two unscrupulous Zimra officials (names supplied) benefited between US$5 million and US$10 million through that scam.

Tax clearance certificates are also another harvesting field for Zimra officials. Some years back, the certificates were issued twice a year but now they are only being issued once a year.
Individuals with clean tax records are often convinced that it is an onerous task to get a tax clearance certificate from Zimra. They are charged about US$300 for this purpose.
Those individuals who would want to evade tax completely bring in what are called nil returns, which means that that particular businessperson has not been active on the trading market.
For an individual to trade with any other regional or foreign company, a tax clearance is required by the law. That also applies in tendering.

Government authorities pushed for the tourism rebate. This enables individuals with properties linked to tourism activities to get an exemption from paying tax when importing anything linked to those facilities.
This was during the time when Government was trying to enhance the performance of the sector.

Several senior Government officials have benefited from the abuse of those privileges by importing personal goods and luxury vehicles. One of the country’s prominent car dealers (name supplied) acts as an agent for the importation of the officials’ vehicles.
The relevant ministries wishing to transact issues out the customs duty tax exemption certificates. This allows the said dealer to import cars duty free under the guise that the vehicles were all meant for those specific ministries. Zimra should release a list of all vehicles imported under that particular rebate.

The disabled are exempted from paying tax and customs duty for goods imported. Some dealers use disabled people as fronts to smuggle goods and vehicles into the country.
Top-of-the-range vehicles which are supposed to pay 100 percent duty are smuggled this way.

Forfeited or seized consignments due to wrong declaration, infringement of Customs and Excise Act, or Income Tax Act are automatically rendered State property and then auctioned.
In other instances, goods are confiscated by the State as a result of failure to pay duty.
The owner is supposed to settle the debt within a maximum period of two months.
Failure to do so will result in confiscation.

When Zimra auctions these goods, the reserve price (which is an equivalent to the initial duty), is supposed to be used. However, inflated prices are advertised to scare away possible bidders. As a result, inside cartels corruptly benefit from the goods.

Economist Mr Witness Chinyama said the main issue was about curbing corruption in the institution.
“Everything that takes place happens within the know-how of the authorities at Zimra,” he said.
Mr Chinyama said lowering tariffs could deter the public from engaging Zimra officials in corrupt activities.
“In the absence of inducements and incentives to follow the laid-down procedures, the public will continue to opt for the subversion of the correct procedures,” he said.

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