A FIERCE storm has erupted at the Zimbabwe Revenue Authority (Zimra) over a US$680 million tax evasion investigation involving BancABC-linked Second Nominees (Pvt) Ltd, The NewsHawks has established.
The latest dodgy deal is one in a series of cases relating to Zimra’s corruption-ridden multi-million-dollar whistle-blowing fund characterised by looting of public funds. Cumulatively, Zimra’s whistle-blowing investigations run into billions.
After eight years playing hide-and-seek over the Second Nominees investigation, Zimra this week replied two whistle-blowers, Evans Kujinga and Martin Macharaga, who had reported the case in 2013. The two whistle-blowers stood to get 10% of US$680 million – which US$68 – but they had been waiting for years now.
A number of meetings and numerous communications have been flying between Zimra and the whistle-blowers over the high-stakes issue.
Despite Kujinga’s connections and influence, Zimra has stalled the investigations.
Source say Zimra executives got loans from BancABC and dropped the case, which whistle-blowers say technically amounts to bribery.
One source said intermittent clashes between Kujinga and Macharaga – who are frenemies – also stymied the probe.
The Zimra letter, dated 1 July 2021, was written by Regina Chinamasa, Zimra commissioner revenue assurance, saying the tax collector was now basically dropping the case after almost a decade.
“I refer to your letter of 27 May 2021 and apologies for the inconveniences caused in the delayed finalisation of the review of this case,” the letter says.
“I note that you (the duo) reported the case in 2013 and completed another Information Report Form on 08.08.2018 stating that Second Nominees was not registered with Zimra and was giving money to companies like Zimbabwe Sugar Sales, Croco Motors, Zimasco, National Foods, Metallon Gold, Sakunda and Wildale Bricks.
You also stated that Second Nominees was charging 10% as interest and the company received over 200 million dollars as interest, but did not pay Income Tax, Paye and Vat.
“Please note that investigations were conducted and the following are my responses to your concerns: I concur with you that at the time of reporting this case, the taxpayer was not registered with Zimra for any tax head.
“Pay As You Earn (Paye).The taxpayer was registered on 29.07.2013. However, the taxpayer does not have any employees and it is remitting Paye as a representative appointed in terms of Section 71 of the Income Tax Act as read with paragraph 2 (4) of Part II of the 13th schedule of the same Act for a non-resident employer. According to paragraph I (l) (b) of the same schedule, Employer includes a representative of the employer.
The non-resident employer appointed a resident representative, Second Nominees, to secure registration on its behalf under this paragraph and otherwise to act as its agent for all purposes of this schedule. Consequently, it was liable for the remittance of the Paye of which it is remitting since registration to date. Second Nominees did not have the mandate to remit Paye for the foreign entity for the period prior to its registration with Zimra.
The Paye was being remitted through another entity within the group or companies. The contract for the loans with the companies you stated were not between Second Nominees and the stated companies save for one, Zimbabwe Sugar Sales. The agreements were entered into with a Foreign Entity hence the interest income did not accrue to Second Nominees.
I will remain guided by who and what you reported in as far as closure of this case is concerned with hindsight of the provisions of Section 34B of the Revenue Authority Act chapter 23: I (i) and SI 150 of 2020.
“However, for purpose of clarity, given the intricacy of the transactions, please note that Second Nominees was used as a conduit for processing transactions involving Zimbabwean local entities and foreign entities. The Second Nominees Account was used as a conduit or collection account for the purposes of disbursing, managing, tracking, monitoring cash flows and collecting repayments from borrowers before repatriating loan repayments back to the original lenders. These services are subject to Income Tax.
“However, after taking: into account all the revenue streams of the taxpayer, it was globally in a loss position for the reported period hence no reward is due to you on this tax head.”
On Vat, Chinamasa said: “The taxpayer is not liable for registered for this tax head. No anomalies were established with regards sugar sales since sugar sales were zero rated in terms of SI (Statutory Instrument) 171 of 2013. The financial services offered to other clients are exempt in terms of Section 1 1 of the Vat Act Chapter 23:12. Consequently, no reward is due to you on this tax head. I hope this brings this case to its logical conclusion and any anxieties and inconveniences caused are sincerely regretted.”
Prior to this, Macharaga had written a letter, one among many others, on 27 May 2021 to Zimra acting Commissioner-General Rameck Masaire further demanding an explanation as to why the investigation had been stalled despite dossiers of information and evidence provided.
In the letter, referenced as Your Reluctance to Tackle a Section 34B case of Second Nominees and Your Undue Protection of the Tax Offender, Macharaga writes about the delays and freezing of the investigation. The whistle-blower says Zimra is not delivering on the issue because its top executives have been given loans by BancABC and suspects they have also cut deals to cover up the issue.
“I write to express my dissatisfaction over the protracted delay and misleading information which your officers have perpetrated over the above mentioned case of Second Nominees (Pvt) Ltd,” Macharaga says.
“This is a long outstanding matter of a Section 34B case of the above-named company which we reported on the 4th of April 2013. I am totally flabbergasted by your reluctance to tackle the Second Nominees case and this is tantamount to criminal abuse of office as a Public Officer as defined in Section 174 of the Criminal Codification & Reform Act (Chapter 7:09).
“As the head of the tax authority tasked with the duty of overseeing the efficient and transparent collection of taxes on behalf of the government, you have dismally refrained from investigating and issuing a tax bill against this company for the past eight years now.
“This is despite the overwhelming information which I supplied to Zimra. To be precise, your office has been duly dilly-darling over the issue and the best it has done is to mislead me by claiming that ‘a team of experts will be assembled to look into this matter’. Much to my chagrin & horror, the so-called team of experts was never assembled to carry out this task notwithstanding the fact that it is the statutory duty of Zimra to do so. What it means is that you have been selling me a dummy over these years as evidenced by the recent e-mails that I received from Mr.(Edward) Phiri (Zimra chief investigations officer) on the 21st of May 2021 at 16:34hrs.
“Surely, you cannot claim that Zimra is under capacitated to carry out the investigations of the tax issues of Second Nominees when the same office has successfully investigated and issued bills in 2015 against companies which traded with Second Nominees like Zimbabwe Sugar Sales.”
The livid whistle-blower suggested Zimra is also afraid of investigating the case, apart from its executives being compromised.
“What is more surprising is that these Section 34B companies were reported to Zimra long after my 2013 report and their investigations took less than six months to complete. Why then is it that the Second Nominees case is treated differently? Is it that this company is owned by political heavyweights who are untouchable?,” the letter says.
“From the litany of excuses I have been given by your officials, it is quite apparent that you are abusing your powers and authority in protecting and shielding this company from the tax laws of this country. Technically, you have criminally abused your duty by showing favour.
“Technically, you have shown favour to the owners of shareholders of Second Nominees by omitting to investigate and issue a tax bill since 2013. The excuses which you have proffered over these eight years are frivolous and supine and they largely boarder on impertinence. Why is it that Zimra is failing to pay us our 10% reward from the monies which has been collected so far?
“We hope you are going to look seriously into this matter and take the required remedial action as demanded by your call of duty.”
But Zimra on 1 July effectively dropped the case. This left whistle-blowers outraged.
Asked for comment, Macharaga said: “Look, I don’t want to talk to the media, but this is monumental corruption and fraud. The sad part is not that I have been mugged, but more importantly Zimra, effectively the government and Treasury, have been robbed of millions in unpaid taxes. Authorities must decisively investigate this urgently and stop the rot. I will talk when I’m ready to.”