eBusiness Weekly
Daniel Nemukuyu
Government could be losing millions of dollars to unscrupulous traders who are evading income tax by receiving payments for goods and services on personal Ecocash, Telecash and One Money lines, Business Weekly can reveal.
Each personal mobile line can receive or send up to $20 000 per day.
The Zimbabwe Revenue Authority (Zimra), over the years, has been struggling to account for all the transactions, hence personal lines have become one of the major conduits for leaks.
While Government is collecting the mandatory 2 percent Intermediate Money Transfer Tax (IMTT) from all transactions through the mobile service providers, entities doing business on personal lines are not paying income tax, value added tax and withholding tax.
Most businesses, especially in the informal sector, have resorted to multiple personal mobile lines for transactions to evade tax.
A business entity with 10 personal lines can receive up to $200 000 daily, which is usually channelled to the black market to buy foreign currency.
Formal bank accounts are easily traced and audited for the purposes of tax.
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 recently when it was amended.
Zimra head of corporate communications manager 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, 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 mobile phone payments which enables them to buy foreign currency on the black market at the end of each day.
Most of the foreign currency end up being externalised, to the prejudice of the Government.
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 for payment.
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 2 percent Intermediate Money Transfer Tax (IMTT) promulgated by Statutory Instrument 205 of 2018, levied on amounts transacted on mobile platforms like agent lines is withheld and remitted by the mobile service providers on or before the 10th of every month.
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 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 Withholding Tax 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.
