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Tapiwanashe Mangwiro, Senior Business Reporter

The Zimbabwe Revenue Authority (Zimra) is mulling severe tax penalties to force public and private entities to pay huge amounts of outstanding tax obligations.

The bulk of the debt is from companies’ failure to make correct tax assessments.

The domestic tax debt stands at ZiG348,33 million and a further US$308,03 million, whilst trade taxes amount to ZiG506,39 million and US$113,37 million.

Zimra  chairman Anthony Mandiwanza said, “It is important to note that 80 percent of the debt is due to new assessments raised from audits and investigations while 20 percent represents uncollected debt.

“The authority is implementing various strategies to collect tax owed by clients.”

Zimra has proposed a review of the rate of interest on outstanding taxes.

The proposal suggests aligning the rate to the bank policy rate (BPR) plus 5 percent, a move aimed at encouraging prompt payment of taxes by companies and institutions.

Economist Dr Prosper Chitambara supports the proposed interest rate adjustment, noting that it could serve as an effective deterrent against tax evasion.

“In the current economic climate, it is crucial that Zimra has the tools to enforce tax compliance. By increasing the interest rate on outstanding taxes, companies will be less likely to delay payments, as the financial penalties will be significantly higher,” Dr Chitambara commented.

However, the proposed rate adjustment has also sparked concerns among some business stakeholders, who argue that it may place an additional burden on companies already struggling with cash flow challenges. Mr Tinevimbo Shava, an economist, cautioned that while the measure could improve tax compliance, it might also lead to unintended consequences.

“We have to be careful that in our bid to enforce compliance, we do not inadvertently push struggling companies further into financial distress. There needs to be a balance between ensuring that taxes are paid and supporting businesses that are still recovering from the economic challenges of the past few years,” Mr Shava explained.

Despite the challenges posed by the outstanding debt, Zimra reported positive revenue performance in the first half of 2024.

The authority’s total net revenue reached ZiG36,06 billion, surpassing the target of ZiG35,39 billion and resulting in a positive variance of 1,88 percent.

This achievement reflects the effectiveness of various initiatives introduced to enhance revenue generation, particularly in key areas such as Individual Income Tax (Pay as You Earn), Value Added Tax (VAT) on local sales, Customs Duty, and the Intermediated Money Transfer Tax.

The introduction of the new currency, ZiG in April this year, has also played a significant role in creating a more stable economic environment, which has prompted businesses to adapt quickly and align with new tax revenue targets implemented in May.

“Fluctuations in commodity prices on the international markets initially impacted mining sector performance, particularly in platinum group minerals, though prices have since shown gradual improvement.

“Individual Income Tax (Pay as You Earn), VAT on Local Sales, Customs Duty and Intermediated Money Transfer Tax posted positive performance as a result of initiatives introduced to enhance revenue generation during the period under review,” Mr Mandiwanza added.

As Zimra continues to navigate the complex landscape of tax collection, the authority remains committed to implementing strategies that will reduce the debt burden while also ensuring that companies and institutions meet their tax obligations.

The proposed interest rate adjustment is just one of the many measures being considered to achieve this goal, with the ultimate aim of fostering a culture of tax compliance that will benefit the entire nation.