.svg){kind=small}
%402x.svg){kind=small}
Taxation proceeds are a major source of revenue for the Zimbabwean government and the tax system is crafted in such a way that all players within the country contribute to the fiscus. Every business which operates in the country must make an active effort to be wary of the tax obligations that they must abide by for three major reasons.
- The tax system is very elaborate
- The tax environment is changing frequently
- There are hefty penalties for illegal activities and errors
At the moment, Zimbabwean education system, only provides for tax literacy on a tertiary level. There is no tax education neither at primary school, nor at high school level. Therefore there is need to actively search for tax knowledge through informal sources, like the Zimbabwe Institute of Tax Accountants (ZITA), national legislation, books and online resources. The Zimbabwe Revenue Authority (ZIMRA) rarely conducts public awareness programs but issues public notices.
Elaborate Tax System
There are well over 30 types of taxes in Zimbabwe. Most of them are collected by ZIMRA, some by local authorities, service providers like Zimbabwe National Roads Authority (ZINARA), Zimbabwe National Water Authority (ZINWA) and many others. These tax collecting agencies use different collection methods and systems. ZIMRA administrates several Acts including Income Tax act, Value Added Tax, VAT act, Customs and excise act and many others. At the moment they use an online electronic system called TaRMS. The taxpayer is required to make their tax declarations and payments through this system for most of the taxes. Asycuda is the system used for Customs duty and related taxes on imports and exports. Taxpayers are required to engage licenced clearing agents in order to process their imports and exports.
According to a study into the Zimbabwean taxation system by Afrobarometer, in 2021, “only one-third (33%) of Zimbabweans consider it “easy” or “very easy” to find out which taxes and fees they are supposed to pay. Almost half (46%) find it difficult, in addition to 20% who say they “don’t know”. Businesses definitely need to build their tax literacy levels in order to navigate this complicated tax landscape.
The tax environment is changing frequently
The Zimbabwean economy has remained highly volatile for a while, with currency changes, high inflation and growth of the informal sector. As a result, the tax authorities keep changing the tax rates and rules to suit the changes. As a business there is need to constantly keep abreast with these tax changes which are introduced every time there is a change in an economic variable. For example, in order to capture some informal businesses which were paying very little taxes in the presumptive tax net, a concept of “deemed corporate taxpayer’’ was introduced. These deemed corporate tax payers have much higher amounts of provisional taxes set for them compared to the presumptive taxes which they were paying. For example, hardware shops were paying US$300 per quarter (cottage industries rate), but are now required to pay US$15000 if they do not comply in the expected way.
Hefty penalties
The tax legislation provides for hefty penalties in the event of errors or illegal activities and this is a reason to know about taxation obligations. Where businesses have limited literacy of the tax system, they then try to evade tax compliance by:
- Paying bribes in order to cover up their failure to comply;
- Keeping two sets of accounts and records;
- Relocating to new premises without notifying ZIMRA
- Temporarily closing businesses during ZIMRA visits
In the end though, it is still better to learn and comply as the penalties are crippling. In customs, we have three times the duty paid value and a third as the highest financial penalty one may be called upon to pay by ZIMRA. Custodial sentences are also possible for some breaches.
Reference/ Citation
Zimbabweans endorse legitimacy of taxation but have difficulty finding out how government uses tax revenues | Afrobarometer Dispatch No. 466
