Cigarette manufacturer, Pacific Cigarette Company (PCC), has slipped into voluntary business rescue after a surprise US$19 million tax bill by the Zimbabwe Revenue Authority (Zimra) left the country’s second largest indigenous tobacco company insolvent.
The Master of High Court has appointed Reuben Mukavhi of Rubaya-Chinuwo Law Chambers Legal Practitioners as the corporate business rescue practitioner after PCC made an application to protect the business and its creditors.
In a statement yesterday, PCC said Zimra told the company that raw materials funded by the company’s customers under the toll manufacturing exercise introduced 18 years ago should pay value added tax (Vat).
“In June this year, without any notice, Zimra performed a spectacular U-turn that has undermined the stability of the business and deemed the raw materials funded by our customers as income, subject to Vat,” the company said.
“They also levied an arbitrary mark-up and interest and penalties on PCC for the tax assessment period 2018 to 2020, to which we have objected. The issued tax assessments against the company impose tax liabilities amounting to US$19 315 233,82 and ZWL$79 845 954,36.”
PCC said the tax collector, which could not be reached for comment last night, garnished all its bank accounts and took the “unprecedented step of instructing our customers to pay Zimra any monies owed to PCC, effectively closing off all the company’s income streams”.
The company said its payment plan proposal “while awaiting the determination of the objection” was rejected.
“At law, the company has an obligation to pay the assessed taxes notwithstanding that it is challenging the tax assessments. Zimra’s unprecedented actions on false tax violations have regrettably placed PCC in an insolvent position, forcing the company’s directors to place the business under voluntary business rescue to safeguard the interests of all creditors and stakeholders, while the company continues to try and amicably resolve the matter with the tax authority,” PCC said.