CONSUMER staple and durable goods manufacturer, Innscor Africa Limited (Innscor), has paid a staggering US$9,26 million to the Zimbabwe Revenue Authority (Zimra) under the "pay now, argue later" principle, amidst ongoing disputes over tax assessments, a top company executive said this week.
The “pay now, argue later” principle is a legal concept requiring taxpayers or businesses to pay assessed taxes or obligations upfront and dispute the validity or amount of the assessment later, usually through legal channels or appeals.
Tax disputes between Innscor and Zimra can be attributed to the absence of clear guidelines and transitional measures.
“The group's divisions and subsidiaries have so far paid a total of US$9,262 million under the “pay now, argue later” principle out of the total amounts assessed,” the firm said in its financial results for the year ended June 30, 2024.
“The legislative gaps giving rise to differences in interpretations remain. Shareholders are further advised that the update on uncertain tax positions has been issued prior to the Finance Bill, 2024 becoming law; this Bill is currently in the Senate for debate and might have a material effect and consequences on the tax position of the group.”
Listed platinum miner Zimplats last week also expressed frustration with Zimbabwe's fiscal framework, describing it as volatile, highly complex and open to conflicting interpretations.
Disclosures by Zimplats, which trades its stock on the Australia Stock Exchange, were the latest to expose ramifications of tax complications confronting companies, as authorities switch from one domestic unit to another, under pressure from battering of the currency.
Companies such as Delta Corporation and National Foods Limited have raised similar concerns.
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Innscor stated that Zimra had assessed additional income taxes, penalties, and interest amounting to US$11,749 million for the periods 2019 to 2021 against its divisions and subsidiaries.
However, the firm noted that this was done for amounts already settled in Zimbabwean dollars, which Zimra deemed should have been paid exclusively in foreign currency, and for matters on which the group believes it has no tax liability.
“No credit has been given by Zimra in the equivalent amounts already paid in the country's legal tender,” the group said.
“These assessments have been objected to and challenged at the courts and are at various stages of appeal,” the group added.
“Should the group's divisions and subsidiaries' various appeals not be successful, the historical Zimbabwean dollars paid towards the settlement of these taxes could be refunded. Due to the effect of inflation, these amounts would likely be paid at extremely low values in today's terms."
Innscor continues to engage relevant authorities while these assessments are being objected to and challenged through the courts.
Tax payments made with respect to the revised assessments have been accounted for as taxation prepayments on the group's statement of financial position, anticipating a successful appeal process.
