Zimra is upgrading its audit and mandatory data gathering
to combat unscrupulous traders using multiple personal mobile money lines to
avoid paying income tax, VAT and withholding taxes by hiding their revenues.
These traders used to insist on cash transactions to keep
their business income and payments secret from the tax authorities, but with the
switch to electronic payments forced by the shortage of cash, they have found
new ways of getting around taxes.
Zimra is now tracking down traders’ mobile lines so it can
get a true picture of just how much someone earns. It has emerged that some
traders have multiple personal lines, making this audit process just a little
more complicated.
In theory, with every transaction recorded on someone’s
database, it is possible to eliminate tax avoidance, but Zimra needs to know
who owns which lines to make this system work.
Zimra has struggled to find out the true income of some
businesspeople, especially those in the informal sector and the less honest in
the formal sector, but assumed with the general move to electronic transactions
it would be simpler.
But these hopes have been partially dashed. Each personal
mobile line can receive or send up to $20 000 a day, and some traders are
believed to have accumulated up to 10 personal lines across the three networks.
The two percent transfer tax on all electronic transactions
cannot be avoided, although customers pay this when transferring money to
traders, but other businesspeople are supposed to keep approved records so they
pay the other taxes.
Even the recent moves by the Reserve Bank of Zimbabwe to
limit liquidity in the foreign exchange black market by limiting Zipit
transactions and the lines used by mobile money agents are being circumvented
by the use of multiple private lines in the hands of a single trader.
Formal bank accounts are easily audited for the purposes of
tax, and small-scale sole traders are allowed to use their personal bank
account for business as well since all payments into that account can be traced
and accounted for if Zimra wants to check.
The Herald also established that the Zimra REV1 form (tax
registration document), which is filled in by entities for the purposes of
applying for tax clearance, did not have a provision for mobile banking
details, until recent amendments.
Zimra head of corporate communications Mr Francis Chimanda
confirmed that collecting tax from businesses using personal lines was giving
the authority a headache.
He indicated that the taxman had since introduced measures
aimed at accounting for the transactions and stopping the leaks.
“For income tax, VAT and withholding taxes on transactions
made into personal lines by “unscrupulous traders” with tax avoidance intentions,
these challenges always exist on accounting for these applicable taxes.
“Hence, ZIMRA has put in place some audit and enforcement
activities, which are conducted both as routine and ad-hoc activities emanating
from surveillances, risk analysis and other enforcement activities designed to
unearth such tax avoidance and recover tax revenue,” he said.
Mr Chimanda said those not complying with the tax
requirements shall be penalised.
“The audit and enforcement process includes reconciling
stock purchases, mark-up margins; sales made, payments received by entities and
individuals in the forms of cash, bank transfers or through mobile banking
platforms — any variances or discrepancies not accounted for will be deemed to
be income received and shall be subjected to applicable taxes, penalties and
interests,” he said.
Most smaller entities in Harare do not have POS machines.
They only accept cash and cellphone payments. The Herald carried out a survey
in and around Harare and established that most traders, especially ice cream
and soft drinks vendors were using personal EcoCash lines.
In Mbare, most informal traders heavily rely on EcoCash
personal lines for payment, and the money is immediately exchanged for American
dollars on the black market.
Some are also involved in the illegal sale of cash through
the cash-out transfers, charging premiums. Such transactions are not taxed.
However, Zimra has made significant progress collecting tax
from agent line owners through mobile banking operators.
The two percent transfer tax is a start and commissions
received by operators of agent lines are subject to income tax and if the
operator is eligible to register for Value Added Tax, when surpassing the VAT
threshold, the operator may be also liable to remit VAT.
Where the operator of the agent line does not have a valid
Tax Clearance Certificate at the time of receiving their commission, the mobile
service provider is mandated to withhold 10 percent on the commission payable
and remit it to ZIMRA on or before 10th of the following month.
Where the operator has employees, the operator is supposed
to remit Pay As You Earn Tax (PAYE) applicable.
Recently, Zimra amended the REV1 form to accommodate mobile
banking details as a way of enforcing tax compliance.
The REV1 form (tax registration document) previously did
not have provision for mobile banking details of a company, but its recent
amendment now enable the taxman to account for tax in respect of transactions
done on agent lines and other mobile banking platforms. Herald
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