Zimra tax audit blitz alarms Zimbabwe business

The Zimbabwe National Chamber of Commerce (ZNCC) has raised concerns over the Zimbabwe Revenue Authority's (Zimra) intensified audit regime, warning that aggressive tax enforcement is placing undue cost pressures on businesses and may discourage compliant taxpayers.

In recent months, Zimra has significantly increased its enforcement activities, leveraging new digital platforms such as the Tax and Revenue Management System (TARMS) and the Fiscalisation Data Management System (FDMS). This shift has resulted in a surge of audits across multiple sectors, leading to steep additional tax assessments for some firms.

Notably, Delta Corporation Limited faced a massive US$74.8 million tax bill, while Innscor Africa Limited was slapped with a US$13.21 million assessment linked to currency-related tax matters. Such burdens have heightened financial strain on companies already grappling with economic challenges.

ZNCC Chief Executive Officer Christopher Mugaga stressed the need for a balanced and respectful approach to tax collection.

"In an economy that has become highly informal, tax authorities become more aggressive because it is harder to collect revenue," Mugaga said. "The current frequency of tax audits - companies being audited three or four times in just two or three months - is not acceptable."

He also acknowledged issues with tax planning and compliance, noting that some firms evade or avoid tax, which ultimately undermines revenue collection efforts.

Policy analyst Simbarashe Mambara explained that while TARMS and FDMS were designed to improve efficiency, their implementation has triggered an overwhelming number of audit alerts.

"Even minor filing errors such as currency code mismatches or timing issues can escalate into full audits," Mambara said. He added that risk filters are typically conservative during early system rollouts, leading to more audits than necessary.

Mambara highlighted that revenue pressures on Treasury have also contributed to the heightened audit environment. Industries with complex cash flows and foreign exchange exposure, including telecoms, mining services, and retail, are particularly affected.

"A firm might undergo a VAT desk review in January, a corporate tax field audit in February, and a Pay-As-You-Earn check in March," he said. "While these are separate audits under different units, businesses experience them as a relentless, overlapping process."

Repetitive audits on the same tax categories, often triggered by new data or unresolved previous issues, are also common.

To address these challenges, Mambara recommended that Zimra recalibrate risk filters, raise audit trigger thresholds as data quality improves, and better integrate audits across different tax heads to avoid duplication.

Zimra defended its audit practices, stating that it is legally empowered to conduct audits whenever tax obligations are not met.

"Taxpayers must ensure proper tax determination, timely return submissions, accurate remittance, record keeping, and cooperation with Zimra," the authority said. "Failure to adhere to these obligations may lead to audits. Audits cannot be limited to a specific number within a given timeframe, as various triggers necessitate them."

As Zimbabwe's business community contends with rising tax scrutiny, striking a balance between effective revenue collection and maintaining a conducive business environment remains a pressing challenge.