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Mildred Chiri

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Zimra systems in shambles

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…inefficiency costs firms, Zim billions

THE Zimbabwe Revenue Authority (Zimra) systems are in a shambles, with companies and individuals being made to pay for the tax collector’s inefficiency while the authority is also suffering huge financial losses due to leakages and fraud, it has emerged.

MOSES MATENGA

Due to the inefficiency, the country has lost millions of United States dollars in potential revenue while prejudicing businesses who now bear the brunt of the taxman’s ineptitude.

The failing systems have exposed the tax collector to fraud with Zimra workers colluding with clients.

According to the Auditor-General (AG) Mildred Chiri’s latest report on state enterprises and parastatals, the authority was found wanting on several issues including value-added tax (VAT) Returns that were taking long to be processed amounted to ZW$1 309 335 146 for the year ending December 2020 while ZW$14 455 494 related to previous years.

This, Chiri said, was in contravention of the law.

“The delays in processing the refunds are in contravention of the Authority’s Domestic Tax Instruction (DTI) 15 which stipulates that the refunds should be processed within 30 days from the date of submission of the application or claim,” the report reads.

It also emerged that the authority was having challenges in the clearing of motor vehicles and losing millions of dollars in the process as a result of fraud with workers colluding with clients.

“The motor vehicle clearance system process has taken time to be fully automated. As a result, it was difficult for the authority to timely identify data capturing errors that were occurring as officers were capturing customs clearing processes (CCC documentation).

“Clients took advantage of the weaknesses in the process and did not properly clear vehicles totalling 1 570 with only 645 vehicles recovered during the period under review,” the report reads in part.

“The implications are loss of revenue in the form of customs duties for the authority due to fraud and collusion amongst clients and employees of the authority.”

On temporary import permits (TIP) of tourists’ vehicles, Chiri’s report stated that the system was not configured to flag vehicles that had expired TIPs when issuing new ones to the applicants.

“In addition, the system did not document the applicant’s essential details like address and full name to allow the authority to flag applicants with outstanding vehicles on TIPs, as a result some applicants had multiple outstanding TIPs. As at December 31, 2020, there were 34 008 (2019: 49620) electronic TIPs that had not been acquitted despite the fact that they had expired. Some date back to the year 2013.”

The number of TIPs that have expired stands at 12 598 and the implication was loss of revenue due to irregular TIPs and mis-statement of the outstanding revenue return.

“Some of the vehicles may have been localised as they are long outstanding, prejudicing potential duty payable.”

On VAT refunds, Chiri said: “Included in VAT refunds of ZW$6.4 billion stated in the receipts and disbursements, revenue return were VAT refunds that were fraudulently processed. The process to quantify the extent of fraud is still in progress, hence this return excludes these amounts.”

Chiri said at least ZW$707 648 618 deposited by clients was not receipted and allocated to any tax head, a development that raised eyebrows for the AG.

“Included in the revenue return is ZW$707 648 618 deposited by clients but not receipted and allocated to any tax head by end of December 2020. The authority attributes the anomaly to insufficient details of the payee and tax heads for online banking systems,” she said.

“The outstanding revenue return was not adjusted for these payments. Some clients then continue to accumulate penalties and interest for outstanding amounts.”

It also emerged that the SAP system allowed creation of duplicate contract accounts for the same revenue head under one business partner number and, consequently, assessments by the authority and payments from clients were being posted to the different contract accounts for the same business partner.

This, Chiri said, distorted outstanding revenue for the individual business partners.

On tax amnesty, the report noted: “The authority introduced a tax amnesty waiving interest and penalties for late payments of tax arising prior to June 30, 2018. As at December 31, 2020 all interest and penalties were yet to be reversed on the accounts of all approved clients. I could not determine the total amount of penalties and interest to be reversed which was included in the Outstanding Revenue Return.”

It also emerged that removal in transit (regional consignments) entries amounting to ZW$140 222 566 (2019: ZW$30 699 543 had not been acquitted as at 31 December 2020.

“Some of the entries date back to the year 2015 and they exclude RITs that are in the process of cancellation once they meet the required criteria. As a result, the extent of outstanding duty payable to be included in the outstanding revenue return could not be ascertained as some of the goods might have been consumed locally,” the report further stated.

On online deposits, it emerged that there was no evidence to support that the authority reviewed its online banking mandatory minimum details required when paying using online platforms.

“As a result, the un-cleared deposits grew to ZW$1 636 814 620 by end of December 2020 due to business partners who were not supplying sufficient details of the Payee and tax heads when making online payments,” the report reads.

“The authority could not allocate these deposits to clients hence the business partner’s debts were not adjusted. Some business partners continued to accumulate penalties and interest for outstanding amounts.

“Mis-statements of the outstanding revenue return as penalty and interest would automatically charged to the business partner’s accounts despite being up to date with the payments.

“The authority should review its banking requirements and engage banks on how the online platforms can be enhanced to enable clients to provide the mandatory details when making tax payments.”

The unallocated amount, Zimra said, was now ZW$707 648 618.

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