Zimra targets unscrupulous traders

Zimra is upgrading its audit and mandatory data gathering to combat unscrupulous traders using multiple personal mobile money lines to avoid paying income tax, VAT and withholding taxes by hiding their revenues.

These traders used to insist on cash transactions to keep their business income and payments secret from the tax authorities, but with the switch to electronic payments forced by the shortage of cash, they have found new ways of getting around taxes.

Zimra is now tracking down traders’ mobile lines so it can get a true picture of just how much someone earns.

It has emerged that some traders have multiple personal lines, making this audit process just a little more complicated.

In theory, with every transaction recorded on someone’s database, it is possible to eliminate tax avoidance, but Zimra needs to know who owns which lines to make this system work.

Zimra has struggled to find out the true income of some businesspeople, especially those in the informal sector and the less honest in the formal sector, but assumed with the general move to electronic transactions it would be simpler.

But these hopes have been partially dashed.

Each personal mobile line can receive or send up to $20 000 a day, and some traders are believed to have accumulated up to 10 personal lines across the three networks.

The two percent transfer tax on all electronic transactions cannot be avoided, although customers pay this when transferring money to traders, but other businesspeople are supposed to keep approved records so they pay the other taxes.

Even the recent moves by the Reserve Bank of Zimbabwe to limit liquidity in the foreign exchange black market by limiting Zipit transactions and the lines used by mobile money agents are being circumvented by the use of multiple private lines in the hands of a single trader.

Formal bank accounts are easily audited for the purposes of tax, and small-scale sole traders are allowed to use their personal bank account for business as well since all payments into that account can be traced and accounted for if Zimra wants to check.

The Herald also established that the Zimra REV1 form (tax registration document), which is filled in by entities for the purposes of applying for tax clearance, did not have a provision for mobile banking details, until recent amendments.

Zimra head of corporate communications Mr Francis Chimanda confirmed that collecting tax from businesses using personal lines was giving the authority a headache.

He indicated that the taxman had since introduced measures aimed at accounting for the transactions and stopping the leaks.

“For income tax, VAT and withholding taxes on transactions made into personal lines by “unscrupulous traders” with tax avoidance intentions, these challenges always exist on accounting for these applicable taxes.

“Hence, ZIMRA has put in place some audit and enforcement activities, which are conducted both as routine and ad-hoc activities emanating from surveillances, risk analysis and other enforcement activities designed to unearth such tax avoidance and recover tax revenue,” he said.

Mr Chimanda said those not complying with the tax requirements shall be penalised.

“The audit and enforcement process includes reconciling stock purchases, mark-up margins; sales made, payments received by entities and individuals in the forms of cash, bank transfers or through mobile banking platforms — any variances or discrepancies not accounted for will be deemed to be income received and shall be subjected to applicable taxes, penalties and interests,” he said.

Most smaller entities in Harare do not have POS machines. They only accept cash and cellphone payments. The Herald carried out a survey in and around Harare and established that most traders, especially ice cream and soft drinks vendors were using personal EcoCash lines.

In Mbare, most informal traders heavily rely on EcoCash personal lines for payment, and the money is immediately exchanged for American dollars on the black market.

Some are also involved in the illegal sale of cash through the cash-out transfers, charging premiums.

Such transactions are not taxed.

However, Zimra has made significant progress collecting tax from agent line owners through mobile banking operators.

The two percent transfer tax is a start and commissions received by operators of agent lines are subject to income tax and if the operator is eligible to register for Value Added Tax, when surpassing the VAT threshold, the operator may be also liable to remit VAT.

Where the operator of the agent line does not have a valid Tax Clearance Certificate at the time of receiving their commission, the mobile service provider is mandated to withhold 10 percent on the commission payable and remit it to ZIMRA on or before 10th of the following month.

Where the operator has employees, the operator is supposed to remit Pay As You Earn Tax (PAYE) applicable.

Recently, Zimra amended the REV1 form to accommodate mobile banking details as a way of enforcing tax compliance.

The REV1 form (tax registration document) previously did not have provision for mobile banking details of a company, but its recent amendment now enable the taxman to account for tax in respect of transactions done on agent lines and other mobile banking platforms.–herald.cl.zw

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