ZCDC burns US$1,7m fortune to pacify Zimra

GOVERNMENT-controlled diamond miner, Zimbabwe Consolidated Diamonds Corporation (ZCDC) was slapped with US$1,73 million penalties after delaying to remit taxes two years ago, official reports showed this week.

The penalties mean state executives ended up diverting public funds — which would potentially pay dividends and develop communities — to pacify Zimbabwe’s aggressive taxman.

But crucial sections of the Public Finance Management Act are rarely enforced, leading to perpetual laxity in managing state resources.

Commentaries to ZCDC audits for the year to December 31, 2022 showed the big miner veered into the Zimbabwe Revenue Authority (Zimra)’s crosshairs after failing to submit Transfer Pricing Returns, which were due on April 30, 2022.

But ZCDC further fuelled Zimra’s pursuit against delinquency after failing to pay Value Added Tax and Income Tax in time, according to the audit.

“The company’s bank accounts were garnished and the charge was amounting to US$1,73 million and ZW$920 million for non-compliance,” acting auditor-general Rheah Kujinga said.

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“The company was not generating enough revenue (during) the year under review. As a result, it was not remitting Value Added Tax and Income Tax on time.”

ZCDC management confirmed the firm was navigating through a dire cash-flow crisis during the period, but it reached out to Zimra to present its case.

“The late payment of taxes during the year was mainly due to cash-flow challenges, which the company faced in 2022,” management said in response to the AG’s report.

“However, during this period, management was engaging Zimra on (a) regular basis, through official payment plans for overdue taxes.

“As a result of these engagements, the company was issued with tax clearance certificate for the full year of 2023,” the report noted.

It is the latest case in the past few months to emerge, showing a big corporation being fined in hefty tax-related issues.

Reports said this week the Supreme Court ruled against Zimbabwe Stock Exchange-listed Delta Corporation, after it appealed a High Court verdict directing the beverages producer to pay US$54,8 million tax charges.

In responses to the Zimbabwe Independent’s questions this week, Delta said it respected legal processes and the authority of the courts.

But it noted that there were ongoing discussions with Zimra on the case.

“We wish to highlight that all taxes for the period in question were paid timely and in full in the legal tender of Zimbabwean dollars (ZWL) as per our understanding of the regulations at that time,”

Patricia Murambinda, general manager for corporate affairs at Delta, told the Independent.

“Delta is committed to ongoing discussions with Zimra to address significant factual and legal questions that remain about the accuracy and fairness of these assessments.

“Moreover, Delta Corporation is reviewing its legal options carefully and constructively, ensuring that our compliance aligns with both the law and the operational framework within which we conduct our business.

“As we move forward Delta will continue to review and explore all avenues, including potential remedies at the court, to ensure that the principles of equity and fairness are upheld,” Murambinda added.

In financial statements released at the beginning of this year, Delta described the penalty as an ‘unjust enrichment’ to Zimra.

Its remarks exposed ramifications of tax complications confronting companies, as authorities switch from one domestic unit to another, under pressure from the battering of its units.

Last month, Nampak one of Zimbabwe’s biggest industrial packaging makers, rejected a ZW$26,7 million penalty slapped on the business by Zimra, arguing it has never compromised on its remittances to the State. Nampak, which also trades its stock on the ZSE, also slammed changes to the country’s functional currency for the deadlock.

Misgivings over Zimbabwe’s half-hearted efforts to address its prolonged currency conundrum have also been voiced by chief executive officers at National Foods Limited and the blue chip Innscor Africa Limited.

Several companies have been working with Zimra on the tax issue, according to industrialists.

But there were already worries this week that Delta’s Supreme Court setback may be a test case for companies fighting a tax collection agency that wins 80% of legal challenges.

In a commentary to financial statements for the half-year ended March 31, 2024, John Van Gend, group managing director at Nampak said misunderstandings between the business and Zimra emanated from ‘significant currency changes in Zimbabwe since 2018’.

US$1:ZW$159,34 as at April 29 2022 and US$1:ZW$22 000 for the last day of reporting, December 31 2023 in relation to the Nampak financials.