Businesses grumble over fiscal devices

SOME businesses which are expected to be in the process of installing fiscal devices are still grumbling about the price of fiscal devices, but the Zimbabwe Revenue Authority (Zimra) is determined to see the project through.

Government announced last year that all Value Added Tax (VAT) registered businesses generating more than US$60 000 per year – an average of US$5 000 per month – should have electronic fiscal devices from January 1, 2017.

Fiscal tax registers record financial transactions from businesses and transmits the data in real time to tax collectors.

Zimra's resolve to ensure compliance is driven by the exponential growth in revenue as a direct result fiscalisation.

Despite softening consumer demand and a tight business environment for companies, VAT collections on local sales had risen to 50 percent in the first seven months of the year.

Also, for 2016, net tax collections on the tax head at US$601 million were 10 percent or US$54 million up from US$547 million a year earlier.

There are however concerns that there continues to be unrestrained revenue leakages from the system. Fiscal devices are therefore expected to plug the loopholes.

A local businessman who spoke to The Sunday Mail Business on condition of anonymity said not only were some of the devices expensive, but they are out of stock as well. This, he said, was making it difficult to comply.

"I visited an approved supplier and the two devices they can supply cost US$1 300 and US$1 700.

"They have given me a quotation of US$1 700 saying this is the best but the company is saying it does not have the devices in stock, so when I pay, they will write me a tax clearance letter which I take to Zimra so that I operate.

"Basically, I am now paying US$1 700 for a piece of paper. What nonsense is that? All the Zimra approved suppliers don't have the devices and they seem to be working in cahoots with Zimra to say, 'no one will get a tax clearance without a fiscal machine'.

"I am not refusing to comply but why should I pay for something that is not there; this is wrong," said the businessman.

The current grumblings within industry are similar to the same teething challenges that Zimra faced when it embarked on the project more than six years ago.

Companies believe that Zimra had to fund the cost of rolling out the project as it was the main party expected to benefit.

Government responded by crafting a law through which companies will be refunded through rebates.

In terms of the law, clients can claim 50 percent of the cost of acquiring the devices as Input Tax on their VAT returns and the balance is claimable as Special Initial Allowance in terms of the Income Tax Act (Chapter 23:06).

In addition, no Customs Duty or VAT is payable on the import of fiscal devices, and no VAT is charged on the sale of the gadgets on the local market, as part of incentives meant to make the fiscal devices affordable for the success of the fiscalisation project.

However, businesses are concerned by the initial outlay that ranges between US$1 000 to US$1 700 for the purchase of different types of fiscal devices.

Global Horizons (Private) Limited, one of the approved suppliers as published in the Government Gazette of July 29, 2011, sells point of sale machines at between US$200 and US$250 while the fiscal printer is going for US$1 050.

This takes the total price to US$1 300, a huge figure that businesses claim is an added cost to doing business, especially in the current economic circumstances.

But such glitches in implementing the project are not peculiar to Zimbabwe alone.

In Tanzania, which has successfully rolled out the fiscalisation project, resulting in a 9,6 percent increase in revenues to the fiscus between 2010 and 2011, and 23 percent for 2011 to 2012, there was also
a furore by some businesses complaining over the cost of electronic fiscal devices.

The Tanzanian government ended up forming a special task force to work on complaints by the business community against the electronic fiscal devices.

Firms that resist fiscalisation in Tanzania are fined 3 million Shillings (almost US$1 343). Zambia is also working on fiscalisation to shore up revenues.

Shortage of devices
Zimra board secretary and director for legal and corporate services Ms Florence Jambwa conceded that the devices were currently not readily available and were expected to hit the market later this month and in early February.

"The response from clients who qualify for fiscalisation has been positive and encouraging.

"Approved suppliers of fiscal devices have been approached by a number of companies and some of these VAT registered companies have either paid deposits or made full payment for their fiscal devices.

"The suppliers of fiscal gadgets are in the process of procuring the devices and delivery is expected in late January to early February 2017," said Ms Jambwa.

The number of firms requiring fiscal machines could not be ascertained as businesses continue to register either voluntarily or due to revenue enhancement measures such as field audits being enforced by Zimra.

The taxman is also working on increasing the number of suppliers of fiscal devices in the market.

According to the Government Gazette of July 2011, there are 10 approved suppliers of the fiscal devices.

Ms Jambwa said the anticipated increase in the number of service providers would "improve the supply of the gadgets" and consequently cause a price reduction due to competition.

Zimra does not determine the prices of fiscal devices since suppliers operate as independent business enterprises.

However, Zimra says it continuously engages suppliers on the aspect of pricing to ensure the affordability of fiscal devices.  "Plans to bring in additional suppliers into the market are expected to result in competition, which may culminate in the lowering of prices of fiscal devices and servicing costs," added Ms Jambwa.

Graft, greed behind proclastination

Sources who spoke to Then Sunday Mail Business last week indicated that suspicious delays in completing the fiscalisation project, which became legally enforceable after Statutory Instrument 104 of 2010 on June 8, 2010, and the seeming protection of an enclave of tax evaders are part of the reasons that led to the suspension of some Zimra directors, particularly in the Information Communication Technology (ICT) department.

In December last year the Authority suspended director of ICT and infrastructure development Mr Tjiyapo Velempini, head of ICT Mr Allen Saruchera, Systems development manager Mr Can Goredema, including some officials in the loss control department. It is believed that some senior executives at Zimra had roped in Inspur — a Chinese information technology multinational company – under unclear circumstances to develop their own tax management system.

The move, which was resisted by the market, was interpreted by approved suppliers of fiscal devices as a parallel programme.

Prices that were offered under the Inspur tax management system were also understood to be triple the market price in some instances.

There are also allegations that Inspur had set aside a resource envelope of US$30 million for the project, but the details remained unknown to the Ministry of Finance and Economic Development, which is the parent ministry of Zimra.

Such undertakings resultantly delayed the roll out of the system and naturally resulted in significant revenue leakages.

There are also damaging allegations that senior management at Zimra were complicitly aided and abetted some non-compliant giant retailers. In a statement accompanying the revenue performance report for the year ended December 31, 2016, Zimra's board chairperson Mrs Willia Bonyongwe last week indicated the extent to which the tax man was been prejudiced by tax evaders and non-compliant companies.

Last year alone, the debt owed by companies rose from US$1,97 billion at the beginning of the year to US$2,7 billion by the end of 2016.

"The growth in debt reflects the new debt arising from an assessment done due to automation either from previous under-declarations and evasion as well as inability to pay taxpayers. Most people do not take their tax obligations seriously and fast and due to corruption have gotten away with it in the past but the system has caught up with them.

"There is also a noticeable increase in litigation from non-compliers and we hope that the Judiciary will allow these cases to be heard fast and we commend the introduction of the Fiscal Court. . .

"Zimra is pushing for stiffer penalties including jail for tax evaders as is best practice globally. . .

"We cannot afford to have enclaves who do not pay taxes," said Ms Bonyongwe.

The electronic cargo tracking system that has since been introduced is also expected to curb transit fraud.