Tax inspection depends on companies’ goodwill
CIVIL society organisations and the business community say the impact of Tax Inspectors without Borders (TIWB) initiative meant to curb tax evasion and illicit financial flows depended on the willingness of actors in Zimbabwe to reform and agree to be scrutinised.
The TIWB project is aimed at helping developing countries boost domestic revenues through strengthening their tax audit capacities and was launched by the Organisation for Economic Co-operation and Development (OECD) and the United Nations Development Programme at the Third International Conference on Financing for Development in Addis Ababa, Ethiopia last month.
A study undertaken by a research firm, Global Financial Integrity revealed Zimbabwe could have lost $12 billion in the past 30 years through illegal financial outflows that included secret financial deals, tax avoidance and evasion and other illegal commercial transactions.
Transparency International- Zimbabwe researcher Farai Mutondoro told Standardbusiness the initiative was an important move for the country, one that’s in line with the recent audit reports by the Auditor-General Mildred Chiri which noted among many anomalies, bad corporate governance and mismanagement. These malpractices led to the loss of $180 million in public funds which could not be properly accounted for, Mutondoro said.
“It is important to note that the problem of tax evasion, avoidance and illicit flows in Zimbabwe as indicated by several of our studies, the 2012-2014 Annual State of Corruption Reports, is fuelled and motivated by politics and grand corruption.
“Therefore the impact of this initiative depends on the willingness of political actors to reform and agree to be scrutinised and also on their willingness to take corrective action. With the recent audit reports, despite the huge evidence warranting prosecution and arrest of certain individuals, no one has been arrested. This indicates that while the initiative is a noble idea as a means to an end, its success depends on other political and institutional processes,” Mutondoro said.
Mutondoro said between 2011 and 2013 audit reports on the police sector by the Auditor-General indicated that at least seven police stations could not account for a whopping 5 033 receipt books for fines known as Z69J. The fines recorded in the books could translate into millions of dollars.
He however said Zimbabwe required these services against the backdrop of what Zimbabwe Agenda for Sustainable Socio-Economic Transformation stipulated on resource mobilisation, and against a background of poor corporate governance, illicit financial flows and corruption.
Mutondoro said at the moment it was difficult to determine the impact the initiative would make in curbing illicit flows. He said if the initiative was to be done in a more objective, logical and non-partisan way, it would certainly make an impact.
The African Capacity Building Foundation (ACBF) executive secretary Emmanuel Nnadozie said the initiative was an encouraging development as it emphasised the need for developing countries to not only concentrate on external financial support, but also look internally for solutions.
“As ACBF, we are of the advice that there is value in strengthening the capacity of African countries to mobilise resources. This is important in a context where donors’ help to the continent has recently shown some signs of decrease,” he said.
Zimbabwe National Chamber of Commerce president Davison Norupiri said Zimbabwe needed to be capacitated as the initiative had come at a time the country was losing a lot of money.
“In a way, we need those [Tax Inspectors without Borders] initiatives.
“Some people who are buying machinery out of the country inflate prices which results in externalisation of funds, but once we get transparency and we capacitate the auditors, we can expose such activities.
“Also, the country is losing money through under-declaration at the borders where some people declare lower prices but if we have such auditors, it would help to maintain uniformity in terms of what product has been bought and for what price,” Norupiri said.
He added that the Tax Inspectors Without Borders initiative would go a long way in strengthening tax audit capacities.
According to figures from the Zimbabwe Revenue Authority (Zimra), revenue collection for the first half of this year had gone down by 6%, collecting $1,66 billion against a target of $1,76 billion
Net collections declined by 3% from the same period last year when $1,72 billion was collected.
In the period under review, VAT on Imports, Excise Duty and Carbon Tax were the only revenue heads that surpassed their set targets.
Commenting on government efforts to increase revenue in his mid-term policy statement, the Finance minister Patrick Chinamasa said Zimra had extended the Tax Amnesty by another four months to October 31 2015.
Zimra is owed over $1 billion by companies in unpaid taxes.