Zimbabwean cigarette company's empire up in smoke

The Pacific Cigarette Company (PCC), formerly known as Savanna Tobacco Company, has been granted its request to undergo voluntary business rescue due to alleged tax violations and outstanding obligations, resulting in a liability of US$19.3 million and Z$79.8 billion.

PCC attributed its financial difficulties to foreign currency challenges faced by Zimbabwe in 2005, leading the company to enter into a partnership with the Reserve Bank of Zimbabwe (RBZ) and initiate toll manufacturing to cope with the introduction of a 50% foreign currency surrender requirement on exports.

PCC claimed that the toll manufacturing model had been promoted by the RBZ as a durable business model to address foreign currency challenges for companies. However, in June of this year, without prior notice, the Zimbabwe Revenue Authority (ZIMRA) changed its stance, considering raw materials funded by PCC's customers as income subject to VAT and issuing tax assessments against the company.

As a result, ZIMRA garnished PCC's bank accounts and instructed its customers to pay any owed monies directly to the tax authority, effectively closing off the company's income streams. In response to these actions, PCC submitted a payment plan proposal, which was rejected by ZIMRA. To safeguard the interests of all creditors and stakeholders, PCC decided to place the business under voluntary business rescue while seeking an amicable resolution to the matter with the tax authority.

PCC, as one of Africa's largest indigenous tobacco companies and Zimbabwe's first locally-owned cigarette company, expressed its commitment to working with ZIMRA to find a solution to the ongoing dispute. ZIMRA declined to comment on individual taxpayers' tax affairs, citing client confidentiality protection by law.