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Zimra executives in US$585m tax evasion corruption scam

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CORRUPTION skeletons involving a series of multi-billion-dollar tax evasion scandals are tumbling out of the Zimbabwe Revenue Authority (Zimra) cupboard amid a new corruption scam involving Chinese diamond miner Jinan Mining (Pvt) Ltd’s dodgy US$585 million financial transfers across various jurisdictions, including Zimbabwe.

OWEN GAGARE

New documents obtained this week by The NewsHawks reveal further corruption by Zimra executives who have been looting the whistle-blower’s multi-million-dollar fund through corrupt networks involving its management and informants.

Documents show that despite being given overwhelming evidence of Jinan’s failure to pay its tax obligations, top Zimra officials manipulated the case for self-enrichment, while protecting the company from properly paying tax.

The tax evasion case against Jinan was reported in 2013 in terms of section 34B (2) of the Revenue Authority Act (Chapter 23:11) by two whistle-blowers, Martin Macharaga and Blessed Tachi, who had big dossiers on the company’s diamond trading activities and transactions.

The documents say Jinan externalised US$585 million to Botswana. This was later exposed by the whistle-blowers, forcing it to bring back part of the money and pay taxes.

In fact, the money was transferred to other financial jurisdictions for dodgy deals, including Zambia, Mozambique, Sierra Leone, Dubai and China.

On 20 December 2011, Jinan had opened a transitory account with BancABC for the purpose of holding the money on behalf of Anhui Foreign Economic Construction Company (Afecc).

The funds were to be used to fund Afecc operations in Zimbabwe and across the region, including diamond deals.

So Afecc, through a series of transactions, from 9 January 2012 to 25 July 2014, transferred from China US$585 163 824.26 into Jinan’s account. The transitory account was then closed on 5 August 2014.

BancABC executives were later arrested over the issue of the money transfers suspected to be money laundering and externalisation.

Documents say whistle-blowers investigated and reported the issue in 2013, but Zimra did nothing despite having ample evidence.

“Through our own efforts and personal sacrifices and at the risk of life and limb, we established that Jinan Mining was not paying taxes and had in fact externalised a staggering US$585 million,” one document, written by whistle-blowers to Zimra, says.

“Despite receiving our report in 2013 with incriminating evidence, plus detailed and voluminous bank details, Zimra failed and deliberately neglected to investigate and recover revenue from Jinan Mining. In the process, government and Treasury lost US$200 million in tax revenue.”

When the case was reported, Jinan was not filing tax returns as required under Section 37 of the Income Tax Act (chapter 23:06).

It is mandatory in terms of the law for every company to file tax returns to enable Zimra to assess and calculate taxable income.

Documents show that the company, involved in diamond trade, was not keeping records as required in terms of section 37B of the Income Tax Act.

Jinan hired South African companies to render various services in Zimbabwe for its diamond trading activities, but did not withhold tax on fees for onward remittance to Zimra.

“Jinan violated Zimbabwe’s company laws. It used BancABC’s subsidiary ABC Asset Finance to camouflage, divert and externalise US$585 million,” the document say.

“This arrangement was a scheme designed to avoid paying tax and for other unlawful deeds.”

The documents say Zimra failed to play its role as a tax-collector due to “dereliction of duty” and “corruption”.

“Despite the fact that whistle-blowers provided solid evidence and documents, Zimra’s top brass, including management, conspired with Jinan and BancABC to shield the company from an investigation on tax affairs. This was in violation of section 98 of the Revenue Authority Act (chapter 23). If Zimra had moved swiftly to investigate the tax affairs of this company, it would have prevented the massive externalisation of the US$585 million,” the documents say.

“The top brass at Zimra, and in particular one former Commissioner-General, was corrupt. He got a US$250 000 loan from BancABC, thus he wouldn’t act in any issue involving the bank like this Jinan case.”

Documents say Zimra was unable to probe many tax evasion cases even if there was undeniable evidence cases due to corruption.

“Zimra is mandated and empowered in terms of section 45 of the Income Tax Act to treat the US$585 million taken out as income. The documents and financial statements we had provided were a solid and sound basis upon Zimra could declare the money taxable income,” another document says.

“All that Zimra required to do was to levy 25% and 15% of the US$585 million as Income Tax and withholding respectively. This would bring a sum of US$232 000 as the principal amount plus 100% interest and another 100%in penalties.”

Besides all this, documents say there was a failure on Zimra’s part to invoke deeming provisions under sections 8, 9 and 10 of the Income Tax to consider all money reflected on the bank statement of the company as received income.

“Above all, Zimra also failed to pay 10% of the US$9 million paid by Jinan in tax arrears. This money was paid as a direct result of the whistle-blowers’ efforts, but Zimra is hiding this information to avoid meeting its own obligations – that is paying 10% monetary reward to the informants under Section 34 (B) 2(a) of the Revenue Act.”

This comes as whistle-blowers behind the case which prompted 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.

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 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.

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