Treasury rejects tax compliance crisis claims

Treasury has rejected claims of a tax compliance crisis in Zimbabwe, accusing some blue-chip companies of using an aggressive public relations campaign to turn disputes over legacy tax liabilities into a national controversy.

Finance, Economic Development and Investment Promotion Permanent Secretary George Guvamatanga said Government was enforcing existing tax laws and had no intention of imposing retrospective obligations on companies that had failed to settle taxes in the currency in which they traded.

His comments come as several blue-chip companies remain locked in disputes with the Zimbabwe Revenue Authority (ZIMRA) over foreign currency tax assessments dating back several years.

Banks have separately raised concerns over the treatment of interest expenses and other complex tax provisions.

"We do not have a national crisis of tax compliance or of historical issues," Guvamatanga said.

He said disputes involving large companies had arisen because some businesses had failed to comply with tax laws.

"Those historical issues with those big companies arise because they chose to exercise tax benevolence, but tax does not have benevolence. It's law and it's black and white. Law is law when it comes to the payment of taxes. It's black and white," he said.

Guvamatanga said Government would continue pursuing outstanding liabilities even where the alleged violations occurred years ago.

"If we realise that you broke the law 10 years ago, we won't erase that. We will follow you," he said.

He dismissed suggestions that the legacy assessments reflected a broader tax compliance crisis, arguing that the controversy had been amplified by large companies with significant public relations resources.

"The noise that we have in this economy has been amplified simply by large corporates. We have corporates in the market who have actually amplified their own failure to follow tax laws into a national crisis," Guvamatanga said.

Guvamatanga maintained that Zimbabwean tax law has always required companies to settle taxes in the currency in which they trade.

"You pay your taxes in the currency of trade. I don't understand how a company with seven lawyers and five chartered accountants in their business could fail to interpret a simple directive," he said.

He rejected claims that Treasury was applying tax laws retrospectively.

"We are not really coming back and putting in new laws. No. It's the same law which says you pay your taxes in the currency of trade. It has always been there. So when you say it's retrospective, it's not retrospective," he said.

Guvamatanga accused some companies of benefiting from the gap between official and parallel-market exchange rates while paying taxes in local currency.

"There was a huge gap between the official and unofficial exchanges. All those companies, again we know, were trading using the unofficial exchange rates. So they grew their businesses, invested," he said.

He argued that taxes that should have been paid to Government were instead retained by companies and used to expand their operations.

"Money that was supposed to come to the government to build roads, to build hospitals, to build schools, at that particular moment in time, they exercised tax benevolence, used that money to capitalise their businesses," he said.

Treasury, he said, was now seeking to recover the money.

"We are simply saying we now need to use our money there. We want it back," Guvamatanga said.

He also criticised companies for raising their concerns publicly instead of engaging Treasury directly.

"I think what we need to do is to stop this public relations exercise. It irritates the government because it is a misrepresentation of the actual facts," he said.

"Come to the government, let's have a conversation."

The Bankers Association of Zimbabwe (BAZ), however, has raised concerns over the application of complex tax provisions, particularly the deductibility of interest expenses.

The banking industry warned that uncertainty around the treatment of legitimate financing costs could undermine lending, investment and financial-sector stability.

BAZ said financial institutions had traditionally treated interest paid on deposits as a deductible expense in line with International Financial Reporting Standards and international banking practice.

"The disallowing of standard interest expenses directly penalises the credit ecosystem, locking up funding that would otherwise support housing mortgages, infrastructure loans and private sector production lines," the association said.

Banks also said they accessed international credit lines at a cost to finance industry and Government programmes, often operating on narrow margins where developmental objectives were an important consideration.

BAZ warned that retrospective reassessments of legitimate financing costs could increase uncertainty for investors and raise the perceived risk of operating in Zimbabwe.

The association has called for greater collaboration between taxpayers and ZIMRA, including increased use of advance tax rulings, interpretative guidance and pre-transaction engagement on complex tax positions.

It also wants ZIMRA to adopt risk-based enforcement that concentrates resources on areas with a higher probability of non-compliance.

BAZ has further called for clearer guidance on interest deductibility, intra-group transactions and financial-sector arrangements.

The dispute comes as Treasury seeks to maximise revenue collection and strengthen tax compliance, while businesses are pushing for greater certainty over how complex tax provisions are interpreted and applied.

The competing positions highlight a broader tension between Government's efforts to recover revenue it believes is owed and the private sector's concerns over predictability, interpretation and the potential impact of tax assessments on investment and lending.