Delta slams opaque tax measures for inflicting US$54,8 million bill

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By Alois Vinga

DELTA Beverages has decried the country’s significant currency and tax legislation changes introduced since 2018 for presenting uncertainties making it difficult for the smooth sailing of businesses.

The outcry somehow resonates with numerous calls made by legislators and concerned stakeholders for authorities to consider making such significant changes via the route of properly debated proposals in Parliament as opposed to abrupt changes by way of Statutory Instruments.

Presenting the group’s performance for the year ended March 31 2024, Delta’s board chairman Sternford Moyo raised serious concerns over the market’s experience of significant currency and legislative changes since 2018.

“These changes have created some uncertainties in the treatment of transactions for tax purposes due to the absence of clear guidelines and transitional measures. There are further complications arising from the wording of the legislation in relation to the currency of settlement of certain taxes which give rise to interpretations that may differ with those of the tax authorities, thereby creating uncertainties in tax positions,” he said.

Moyo said as a result, the Zimbabwe Revenue Authority (ZIMRA) has made additional Income Tax and Value Added Tax assessments, penalties and interest amounting to US$54.8 million, (for periods 2019 to 2021), against Group entities for amounts that were settled in Zimbabwe Dollars, but that ZIMRA deem should have been paid exclusively in foreign currency.

No credit to date has been given by ZIMRA to the equivalent amounts already paid in legal tender of Zimbabwe.

Delta said these assessments are being objected to and challenged through the courts and are at various stages of appeal.

The principal amount settled in Zimbabwe Dollars, which excludes penalties and interest, is equivalent to US$9.8 million for Income Tax and US$25,2 million for Value Added Tax (total US$35 million) based on the exchange rates prevailing on the date of payment.

“Should the group’s appeal not be successful it could be refunded the historical Zimbabwe dollars paid towards the settlement of these taxes. Due to the effects of inflation, these amounts would be equivalent to US$115,000 based on the exchange rate prevailing on the 31st of March 2024, a situation which may result in unjust enrichment to Zimra. The resultant value loss to the Group if the full amount is determined to be payable would be US$ 54.6 million,” the company said.

“A favourable determination on these tax matters is anticipated based on the interpretation of the law at the time of settlement. To date, the Group has paid US$6 million under the “pay now, argue later” principle.

The legislative gaps giving rise to differences in interpretations remain and could lead to additional assessments for periods not yet audited by Zimra,” added Moyo.