Zimra, Delta in fresh spat over taxes

The Zimbabwe Revenue Authority (Zimra) is demanding an additional US$73 million in tax from Delta Corporation Limited, escalating tensions between the tax agency and one of the country's largest corporations. The demand, which covers the 2019 to 2022 period, includes principal tax, penalties, and interest for both value-added tax (VAT) and income tax.

Delta, listed on the Zimbabwe Stock Exchange, has already paid US$72 million in taxes for the quarter ending June 30, 2025. In a trading update, the beverage giant warned that enforcement of the disputed assessments, which are currently being challenged in court, could significantly disrupt its operations.

"The assessments do not consider the local currency payments made at the relevant time, which have since been debased through inflation and currency depreciation," the company said.

Delta said it had already paid US$11.6 million under the "pay now, argue later" principle while legal proceedings continue. The dispute is one of several arising from Zimbabwe's volatile exchange rate, high inflation, and ambiguities in tax law interpretation. Zimra claims it has successfully defended 80% of such cases in court.

In its annual report for the financial year ending March 31, 2025, Delta disclosed it paid a total of US$254.15 million in confirmed taxes, including US$230.35 million in indirect taxes such as VAT, excise duties, and sugar tax, and US$23.8 million in income tax. Indirect taxes rose by 19%, while income tax increased by a staggering 516.52%.

The latest demand follows a prior additional assessment of US$74.8 million related to exchange rate conversion issues, which Delta is also contesting through the courts.

The company warned that ongoing tax disputes could destabilise its financial position. "These assessments have a material impact on the group's operations, if they materialise as per the extant assessments. The ambiguities in the tax legislation are pervasive, thereby creating risks of further disagreements in interpretations and application to current taxes," Delta stated.

Delta also raised concerns about Zimra's Tax Revenue Management System (TaRMS), which it says has led to misallocations of tax payments and failed to accommodate payment instructions submitted by taxpayers.

Despite adverse rulings from both the High Court and the Supreme Court, Delta indicated it is pursuing appeals and legal remedies. The Constitutional Court recently declined to hear the case, advising the company to seek resolution through fiscal courts.

Delta is hopeful that any future tax payment revisions will take into account the company's financial situation and the fact that it paid principal amounts in legal tender during the disputed periods.

The company also revealed that it is owed significant amounts in Treasury Bills by the government and suggested these could be used to settle part of the disputed liabilities should they be upheld.

Meanwhile, the shadow of these tax challenges is impacting Delta's expansion strategy. The company said strong lager beer sales in the first quarter highlight the urgency of investing in capacity expansion to meet growing demand, but noted that project commissioning timelines remain long.

Revenue for the quarter grew by 25% compared to the same period last year, driven by increased volumes in alcoholic beverages and the full consolidation of Schweppes as a subsidiary. Delta says it remains focused on leveraging consumer spending and demand-driven opportunities, even as tax pressures mount.