One of Zimbabwe’s largest industrial packaging manufacturers has contested the hefty penalties imposed by the Zimbabwe Revenue Authority (Zimra), arguing that it has always adhered to its tax obligations.
Nampak Zimbabwe, listed on the Zimbabwe Stock Exchange, attributed the deadlock to complications arising from constant shifts in the country’s functional currency, leading to a disputed levy of ZW$26,7 billion.
Nampak’s recent disclosures are part of a broader wave of grievances expressed by some of Zimbabwe’s biggest corporations regarding Zimra’s tax policies.
Chief executive officers from National Foods Limited, Innscor Africa Limited, and Delta Corporation, among many others, have also voiced concerns over the country’s inconsistent currency policies.
In commentary accompanying financial statements for the half-year ended March 31, 2024, Nampak’s group managing director, John Van Gend, highlighted that misunderstandings with Zimra stemmed from significant currency changes in Zimbabwe since 2018.
“The Zimbabwe Revenue Authority issued income tax assessments and levied penalties and interest relating to the provisions and reversals of the legacy debt-related transactions raised at one of the group’s entities for the period 2019 to 2020,” Van Gend explained
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“The ZW$ (Zimbabwe dollar) equivalent of the disputed assessments, including interest and penalties, amounts to ZW$26,7 billion as of March 31, 2024. These assessments have been objected to, and based on legal advice received, the board is of the view that there is no liability and that Zimra will reverse the assessments once ongoing engagements and clarifications are concluded.”
Van Gend further noted that the currency changes created uncertainties in the tax treatment of transactions due to the absence of immediate and clear guidelines and transitional measures.
Nampak, which operates leading packaging brands such as Hunyani Paper and Packaging, Mega Pak, and CarnaudMetalbox, reported a combined inflation-adjusted turnover of ZW$976,2 billion during the period under review, an 8% decline from the prior comparable period.
Firms affected by Zimra's crackdown on alleged tax defaulters are increasingly turning to the courts.
In an interview with the Zimbabwe Independent, Zimra’s domestic tax commissioner, Misheck Govha, said the tax authority had won 80% of the cases heard in court.
“In terms of winning cases, we are at 80%, and we have lost 20% of cases taken to court,” Govha said.
Delta Corporation, another major player, announced in March that it was contesting a US$54,8 million tax charge, describing it as an ‘unjust enrichment’ to Zimra.
“The Zimbabwe Revenue Authority has made additional income tax and value-added tax assessments, penalties, and interest amounting to US$54,8 million for periods 2019 to 2021, against group entities for amounts settled in Zimbabwe dollars, but that Zimra deems should have been paid exclusively in foreign currency,” Delta’s chairperson Sternford Moyo said.
Delta, which manages high-end beverage brands including African Distillers, is challenging these assessments in court.
“No credit has been given by Zimra to the equivalent amounts already paid in legal tender of Zimbabwe. These assessments are being objected to and challenged through the courts and are at various stages of appeal,” Moyo said.
“The principal amount settled in Zimbabwe dollars, which excludes penalties and interest, is equivalent to US$9,8 million for income tax and US$25,2 million for value-added tax (total US$35 million) based on the exchange rates prevailing on the date of payment.
“Should the group’s appeal not be successful, it could be refunded the historical Zimbabwe dollars paid towards the settlement of these taxes.
“Due to the effects of inflation, these amounts would be equivalent to US$115 000 based on the exchange rate prevailing on March 31, 2024, a situation which may result in unjust enrichment to Zimra,” Moyo added.
- The exchange rate on the last day of the reporting period was US$1;ZW$22 000.