…Zimra executives caught lying
WHISTLE-BLOWERS behind the case which prompted the Zimbabwe Revenue Authority (Zimra) to launch a US$680 million tax evasion investigation involving BancABC-linked Second Nominees (Pvt) Ltd, say tax authorities decided to close the file due to corruption.
This comes as the informants also say Zimra officials should be investigated as they are not telling the truth when they now claim – as they did in an official letter on 1 July – that Second Nominees have no tax obligations.
The whistle-blowers, Evans Kujinga and Martin Macharaga, previously reported Zimra officials to the Zimbabwe Anti-Corruption Commission over tax evasion cases, and corruption at the associated multi-million-dollar whistle-blowing fund.
The two whistle-blowers stood to get 10% of the recovered tax obligations involving US$680 million worth of transactions.
The whistle-blowers say contrary to what the Zimra authorities are now saying, there is evidence to show that Second Nominees has accepted its tax obligations, hence it had by 2016 paid just over US$1 million (US$1 084 001 to be precise), according to Zimra’s internal audit seen by The NewsHawks.
They also say, to date, Second Nominees have actually paid US$7 million. This means Zimra owes the whistle-blowers US$700 000.
As a result, Zimra officials are “telling lies” that the company has no tax liabilities, the whistle-blowers charge.
The informants also say they have discovered Zimra is misleading them when it says it had been investigating Second Nominees as no serious probe had ever been conducted as the tax collector’s executives had been compromised with loans and other inducements.
The whistle-blowers say Zimra executives got loans from BancABC and dropped the case, a move which they say technically amounts to bribery and hush money.
So the only checks that were done on the issue were merely designed to help Zimra authorities to leverage the case against Second Nominees for self-interest, they say.
Zimra has been prevaricating over the Second Nominees investigation since 2013, but last week wrote to the whistle-blowers, saying the company had no tax obligations, thus case closed.
A number of meetings have been held and numerous communications have been flying between Zimra and the whistle-blowers over the high-stakes issue.
In the letter dated 1 July 2021, written by Regina Chinamasa, the commissioner in charge of revenue assurance, Zimra said the tax collector was now basically dropping the case after almost a decade.
The whistle-blowers say what Chinamasa wrote is untrue and amounts to a corrupt cover-up by Zimra officials.
They say the government must investigate the issue and truth will emerge.
Despite Kujinga’s connections and influence, Zimra has stalled the investigations.
One source said intermittent clashes between Kujinga and Macharaga – who are frenemies – also stymied the probe.
In a letter to the then Zimra chairperson Callisto Jokonya on 16 July 2019, Macharaga said the case had been stalled due to “gross violation of tax laws and corruption in the Section 34B case of Second Nominees”.
“Subsequent to the last detailed letter to you dated 04 March 2019 regarding the monumental tax evasion practice by Second Nominees (Pvt) Ltd, I submit hereunder the list of the various tax laws which were wantonly violated by both the company and Zimra officials,” the letter says.
“From the information which we provided together with the additional information in the modus operandi of Second Nominees, it is crystal clear that this company was formed to facilitate self-enrichment through tax evasion by the minority shareholders of BancABC in contravention of Section 86 of the Income Tax Act (Chapter 23: 06). It is beyond doubt that the company was involved in high value non-core banking activities of BancABC.
“Despite the hard evidence which we had provided in 2013, our report could not see the light of day because the Zimra top brass was blinded by the easy access to loan facilities which were advanced by the bank and which in the strictest sense were bribes meant to shield the company’s filthy tax affairs from the tax radar of Zimra. There is sufficient indisputable documentary evidence which we have already supplied to buttress this assertion.”
The letter says that Zimra officials decided to put their own individual interests above those of the government, Treasury and the public, thus they must be investigated for undermining national tax collection efforts.
“Secondly, the company was not keeping any records of its tax affairs as required by Section 37B of the Income Tax Act. The failure to keep such mandatory records was a deliberate and well-orchestrated plan to avoid detection. Any violation of Section 37B by a company is a serious offence and our courts of law have openly deprecated such illegal practice,” the letter says.
“Thirdly, when we reported this Section 34B in 2013 Second Nominees was not even registered with Zimra for tax purposes. The company was not filing any returns as required by Section 37 of the Income Tax Act and was thus not paying Income Tax, withholding tax, Vat and Paye. The failure to register for tax purposes is itself a serious violation of the tax laws.
“Fourthly, the company was using BancABC staff to carry out its activities and not remitting any PAYE (pay-as-you-earn) for these specified employees who were double dipping.
“Fifthly, the US$200 Million that was used to set up is a Mauritius-based investment holding company by former BancABC executives focusing on private equity. To date, that company has invested in oil & gas, financial services and real estate, yet Second Nominees, which those executives managed, has not been paying tax.”
The whistle-blowers say they provided Zimra with well-documented dossiers, including a six-page bank statement, but there was no meaningful action taken by the tax authority.
“This is a clear case of dereliction of duty and corruption by those charged with the administration of Section 34B cases,” the letter says.
“Zimra officials had all necessary tools of trade and requisite tax laws at their disposal to tackle this case. To begin with, when it was reported that Second Nominees was not Zimra registered and had moved over $680 million as of 2013, Zimra officials were put in a scoring position to fully investigate the tax affairs of the company. But alas, nothing was done. It is more disturbing for any right-minded tax officials to refrain from acting when there is evidence that the company has violated Section 37 of the Income Tax Act.
“Zimra is empowered to do assessments against Second Nominees in terms of Section 45 if the client was not forthcoming. The assessments envisaged in Section 45 are mandatory and more so when we had provided a six-paged bank statement that showed US$1 billion had escaped tax and resulting in a prejudice of over US$200 million to the fiscus.
“Zimra had been supplied with a bank statement and was empowered to treat all the amounts reflecting thereon as income in terms of Sections 8,10, and 12 to come up with an estimate of the tax liability. These sections are known as the deeming provisions, and it is strange that no such effort or attempt was done by the Zimra officials.
The letter says Zimra officials, Chinamasa in this case, were not telling the truth when they say the company had no tax liabilities.
“Chairman, we are reliably informed that Second Nominees have cumulatively paid Zimra US$7 million in taxes from 2014 to date. This payment was made as a direct result of the information and report which we supplied to Zimra in 2013 in terms of Section 34B (2) of the Revenue Authority Act (Chapter 23:11).
“However, for some unknown reasons and in contravention of the said Act and the contract entered by us and the Commissioner-General (Faith Mazani at the time), Zimra has concealed this transaction from us and has deprived us of our 10% monetary reward. What it means is that Zimra has benefitted from our information, but is now depriving us of our lawful entitlement.”
Zimra has not been replying to enquiries from The NewsHawks. —STAFF WRITER.
