Zimbabwe retailers dribble tax authorities

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A NUMBER of business and retail owners are dribbling tax authorities by linking point of sales machines (POS) to individual accounts to evade paying taxes.


Large retailers are buying foreign currency from the black market

Large retailers are buying foreign currency from the black market

The unscrupulous dealers were duping the taxman through sub-contracting some of their stock to their employees — who are not registered retailers — resulting in a number of retailers operating outside the tax net, a source within the Zimbabwe Revenue Authority (Zimra) has said.

“We have heard that some companies or retailers are making customers swipe their payment for goods bought into the accounts of their employees with whom this trickery would have been agreed. The manager then arranges with the employee on how he can get access to the money,” he said adding: “Mind you, this is only done with trusted employees and not just anyone.”

The cash shortages have spawned the increase in the use of plastic money with retailers obtaining POS machines to enable customers to buy their products.

Zimra acting commissioner general, Happias Kuzvinzwa confirmed the malpractice saying the taxman would descend on the retailers.

“Indeed, some businesses are not separating personal and business earnings and Zimra is taking steps to deal with such businesses and individuals. The individuals will be subject to taxation in their individual capacity. There are many cases that are being investigated or audited in this regard,” Kuzvinzwa said.

“The authority carries out audits and investigations on an on-going basis and one of the audit tools is to reconcile bank statements to sales and expenses. The reconciliations are, therefore, quite often. The tax system is based on a self-assessment system whereby the taxpayer is supposed to make voluntary and correct declarations. The role of Zimra is then to audit the submissions of the taxpayers on an ongoing basis.”

He implored members of the public to provide them with information on businesses and individuals doing such practices, so that targeted investigations could be carried out.

In his mid-term monetary policy statement, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya encouraged banks to make sure businesses refrain from linking their business POS machines to individual accounts.

“Banks should ensure that business POS machines are not linked to individuals’ accounts. This malpractice or financial indiscipline is negatively affecting the tax base as business accounts reflect little business, while most of the transactions are being reflected in individual accounts,” he said.

According to economists, the idea of getting customers to swipe into an employee’s bank account — instead of the companies — was to avoid paying taxes and to increase their chances of getting cash.

According to RBZ statistics, there were about 3,78 million debit cards as at June 30 that transacted in the retail sector, showing the volumes of people who transact on POS machines.

RBZ said about $500 million was processed in the retail sector on 44 586 POS machines, showing the size of cash with Zimra losing a bit of it in the form of value added tax.

Currently, companies are allowed to withdraw an average of $100 a day from a company account, while individuals are allowed an average of $50.

As such, by debiting the cash from the purchase a customer would have made into an employee’s account, a retail owner is able to make an additional $50 in withdrawals.

Once an employee has received the money in their account, their employer then tells them to send the money to their personal mobile money account or asks them to get cash by paying a 15 to 20% premium via electronic transfer.

One cash dealer, who operates from the Eastgate Mall in the central business district told NewsDay that the increase in the number of people seeking cash from them could be attributed to the increase in the number of people getting cash for their employers in the retail industry.

Since April, United States dollars in circulation have slowly declined, while bond notes have grown to $175 million in circulation.

In recent months, the parallel market has seen massive spike in day-to-day cash transactions.

Confederation of Zimbabwe Retailers president, Denford Mutashu said unregistered retailers were fuelling the estimated $5 billion cash circulating in the informal sector.

“The informal trade is estimated to circulate +/- $5 billion and the unregistered retailers are part of that monster figure. Hence, the need to double efforts to regularise through an incentive system towards capacity building, access to financing and boost their ability to contribute to the fiscus and general wellbeing of the economy,” he said.

Mutashu, however, said they had not received any cases of retail employees collecting money on behalf of their employers.

“We would be happy to know the names of the retailers and wholesalers who are engaging in those nefarious activities to allow us the engage the Reserve Bank of Zimbabwe,” he said.

Financial expert, Persistence Gwanyanya said the central bank had in the past had to intervene in such cases with retailers.

“Notable incidents where the Reserve Bank of Zimbabwe has had to intervene include cases where some major retailers did not even have a local bank account and as such were not depositing their daily takings at all,” he said.

“Large retailers who were fuelling the black market for currencies as well as leading the three-tier pricing system were similarly pursued. This is made possible by engagements such as these — thanks to CZR for leading in this area.”

Last week Zimra board chairperson Willia Bonyongwe urged legislators to get their constituents who qualified for the fiscalisation programme to acquire fiscal devices in accordance with the provisions of the law.

“As you recall, the fiscalisation programme was extended to cover all Value Added Tax registered operators and, as the presentations will unpack, the installation of fiscal devices enabled Zimra to monitor transactions real-time, which goes a long way in curbing under-declarations and under-invoicing,” she said.

“It is also good that Zimra has now been approved to sell the fiscal devices, and this improves the availability and affordability of the fiscal gadgets.

“The success of the system, together with other innovations that Zimra is implementing to safeguard revenue, to improve the ease of paying taxes and duties and to enhance operational effectiveness, depends heavily on your support.”

Bonyongwe said this would help expand the tax net and capture taxes.

In the first half of the year, the tax debt increased by 16,85% to a closing amount of $3,12 billion as at June 30 from an opening debt of $2,67 billion in January 2017.