Zimpapers Logo

Justice Mayor Wadyajena

Daniel Nemukuyu Senior Reporter
The Constitutional Court yesterday postponed the tax dispute pitting Mayor Logistics and the Zimbabwe Revenue Authority to next week to allow the parties to file the relevant papers.
Deputy Chief Justice Luke Malaba, deferred to July 11 the urgent chamber hearing in which Mayor Logistics is contesting the authority’s taxing system.

Mayor Logistics, which allegedly owes zimra US$3 235 814 in Value Added Tax and Income Tax, seeks to stop the taxman arguing that the figure was unjustified and the calculations were wrong and inaccurate.

The company that is involved in the transport and fuel business argues that zimra used the wrong principles in calculating its arrears tax and wants the taxman to be barred from garnishing its accounts pending determination of its appeal by the Fiscal Appeals Court.

Lawyers representing zimra and Mayor Logistics yesterday agreed to the postponement of the case, which was endorsed by Justice Malaba.

“It is ordered by consent that the matter be postponed to 12pm on July 11, 2014.

“The applicant should have filed supplementary heads of argument by 4pm on July 4, 2014.

“The respondent should have filed heads of argument by 4pm on July 9, 2014,” ruled Justice Malaba. It is the company’s argument that zimra failed to appreciate its business relationship with Sakunda Energy.

Mayor Logistics purchases fuel from Sakunda and pays for it in kind through providing transportation services.

In the founding affidavit by Mayor Logistics’ accountant, Mr Farai Mhangwa, it is argued that zimra was wrong in interpreting the relationship as a taxable transaction.

“The respondent (zimra) contends that payment for fuel in kind has led to the under-declaration of sales by the applicant and that such payment in kind should be construed as a taxable supply as contemplated in the Act.

“The applicant disagrees with this interpretation and argues firstly, that payment for fuel in kind is not a ‘supply’.

“Secondly, the applicant has not under-declared its sales as alleged by the respondent. Applicant maintains that the triggering factor for vat is the supply of goods and services and not the purchase of fuel,” reads the affidavit.

Mr Mhangwa further argues that zimra should make a clear distinction between the two transactional relationships between Mayor Logistics and Sakunda, which involves the provision of transport services and the purchase of fuel.

zimra has since hinted on its intention to collect the outstanding tax anytime.

Considering the modest profit margins that Mayor Logistics makes in any given trading year, it would not make the millions of dollars claimed in a period of 10 years.

zimra Commissioner-General Mr Gershem Pasi, filed an opposing affidavit in the matter arguing that the authority was empowered by the tax regulations to assess the arrears and to collect them.

He indicated that Mayor Logistics actually offered transport services to Sakunda and that it should be taxed.

“The respondent carefully analysed the two transactions and found them to be independent. Two separate contracts exist, that is, one for the supply of fuel transportation service to Sakunda.

“It should be noted that the provision of transport service is standard rated at 15 percent and the applicant is obliged to account for output tax. On the other hand, Sakunda sells fuel, which is exempt from VAT, hence no VAT obligations arise for Sakunda Energy,” Mr Pasi said.

Mayor Logistics’ transactions, according to Mr Pasi, shows that the company under-declared the amounts receivable for transport services provided to Sakunda.