ZIMBABWE’S plastic products makers are dodging tax by issuing sales receipts in foreign languages, an investigation by businessDigest revealed this week.
Our investigation revealed that the practice has spread from foreign businesses to local operators.
A company must register for value-added-tax (Vat) if its annual sales are greater than US$60 000.
Businesses must use fiscal machines and maintain books of accounts, according to the Zimbabwe Revenue Authority (Zimra).
When an operator reaches or exceeds this threshold but does not register, Zimra may force the operator to comply and pay fines. Under the law, receipts and invoices must be issued in English.
However, this newspaper uncovered tax fraud schemes used by both domestic and foreign business owners.
The issuance of sales receipts in foreign languages, or selling things in US dollars but producing Zimbabwe dollar receipts are some of the methods being deployed to beat the system. Businesses in Harare's Graniteside industrial area mostly engage in this.
Small businesses have occupied space vacated by large organisations who were forced out of business by the severe economic climate in Harare's industrial sites.
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They market low-cost plastic goods such footwear, raincoats, packaging, cookware, and washing utensils.
Tax specialists believe that, by issuing sales receipts written in foreign languages, businesses were concealing information.
“We do this to avoid paying taxes. Vat is expensive in Zimbabwe and as small businesses we are struggling to keep up with it,” said one plastic shop owner in Harare.
Zimra head corporate communications Francis Chimanda said it was an offence to keep business records in any other language other than the English language.
According to Chimanda, any individual or organisation that encounters taxpayers engaging in dishonest behaviour, such as producing invoices and receipts in any language other than English, should report such instances to the tax collector so that corrective action can be taken.
He said that Zimra has implemented remedial actions to get rid of practices like sending invoices or receipts in languages other than English. These include the establishment of specialised units that look into taxpayers who commit fraud such as keeping business records in languages other than English.
Some of the measures taken included levying fines and prosecution.
“We are using the block management system to monitor taxpayer compliance, especially issuance of invoices or receipts in the English language and in the currency of transaction. This was implemented starting 2 January 2023,” he said.
“Some amounts are lost through tax evasion and avoidance and the audit and investigation activities that we carry out have managed to reveal such amounts. The exact amount lost through evasion or avoidance is not determined at the moment.”
According to Chimanda, small-and-medium-sized businesses and the informal sector in general were at the top of the list for tax fraud and avoidance.
“However, from the audits and investigations done, we have noted that taxpayers from different sectors of the economy have been caught evading taxes through tax evasion activities such as underreporting income, deliberately underpaying taxes, falsifying records of income, destroying records, claiming non-existent refunds or illegitimate deductions (business expenses, dependents, etc),” he said.
Our research indicates that some businesses violate national regulations by selling their products entirely in US dollars while generating sales receipts in the local currency. When doing business, some companies do not send out tax invoices.
Chimanda said that it was unlawful for any tax-paying individual to sell their goods for US dollars and then produce sales receipts in the local currency.
He said taxpayers who engage in this practice should be reported so that they face the full wrath of the law.
“The law is very clear that taxpayers should issue receipts and invoices and keep all business records to reflect the currency of the transaction. In addition, members of the public are urged to request for invoices or till slips and receipts displaying the currency they have transacted in and or paid,” he said.
