Zimra can't account for ZW$1 billion

THE Zimbabwe Revenue Authority (Zimra) has failed to account for millions of dollars in tax and deposits paid by clients, amid indications of massive fraud facilitated by weak accounting systems, raising questions on transparency.

Zimra, established in terms of the Zimbabwe Revenue Authority Act [Chapter 23:11], is the government's revenue collection arm.

Latest findings by acting Auditor-General Rheah Kujinga, in her State Enterprises and Parastatals report for the year ended 31 December 2022 tabled before Parliament, have shown that Zimra received a total of ZW$1.098 billion in deposits from clients, which was neither receipted nor allocated to any tax head as at 31 December 2022 due to insufficient payment details.

"These amounts were not receipted and allocated to any tax head as at December 31, 2022 due to insufficient payment details. As a result, some clients continued to accumulate penalties and interest for outstanding amounts. The outstanding revenue return have not been adjusted for these deposits," reads the report.

The report has shown value-added tax (Vat) refunds which were fraudulently processed during the year ended 31 December 2020.

However, according to the report, the process to quantify the extent of fraud was yet to be finalised as internal investigations had not been concluded.

Zimra has also failed to account for over 25 000 temporary import permits (TIPs) it issued but had not been cleared by the time of audit.

TIPs are a rebate of duty granted to foreign-registered vehicles, temporarily imported into Zimbabwe by a tourist for their own personal use, but not for disposal, trade or commercial purposes.

"There were 26 487 expired electronic Temporary Import Permits that were issued and had not been acquitted as at December 31, 2022. In addition, the Authority issued 43 385 manual Temporary Import Permits during the year, however, l could not establish the number of manual TIPs that had expired due to weaknesses in the internal controls," reads the report.

"As a result, I could not verify the total number of expired TIPs that were not acquitted. I was therefore not able to establish any potential duty in relation to expired TIPs that were not acquitted. The report has also shown that the authority's E-service platform was not performing as expected since 2016, failing to handle voluminous transactions during peak periods of returns submission, leading to mis-statements."

Added the report: "Although the Authority had put alternative means of submitting returns through emails and then capture them manually into the system, it was not able to clear all submitted returns, leading to some clients' accounts remaining in credit as at December 31, 2022. As a result, some business partners with outstanding returns were not charged civil penalties on outstanding returns. I could not establish the extent of the mis-statement."

The report has also shown that Zimra has failed to account for foreign currency-denominated leases, owing incomprehensive accounting procedures and systems, raising the risk of mis-statement of financial documents.

"The disclosed right of use assets of ZW$1.5bn and lease liability of ZW$1.96bn included foreign currency-denominated leases, which were not translated using the interbank rate that was prevailing at the time of payment or the spot rates, as prescribed by IAS 21– ‘The Effects of Changes in Foreign Exchange Rates'," reads the report.

"Therefore, the foreign exchange gains and losses on these leases were not recognized in line with the requirements of IAS 21– ‘The Effects of Changes in Foreign Exchange Rates'. In addition, the terms of the lease (lease payments and lease period) were revised during the year ended December 31, 2022. This constituted a lease modification in terms of IFRS 16- leases. However, the Authority did not account for the modification as required by IFRS 16- leases."

The AG has also red-flagged Zimra's lack of infrastructure as a possible entrance for illegal goods into the country.

"Chirundu border post did not have incinerators to destroy goods seized in terms of section 193 of the Customs and Excise Act [Chapter 23:02]. As a result, there were prohibited goods such as skin-lightening creams, tablets, and medicines that were under notice of seizures which were beings stored in the warehouse. These products were supposed to have been destroyed after the expiry of ninety (90) days from the date of seizure," the report reads.