THE country could be losing millions in potential revenue through tax evasion among other underhand dealings involving players in the mining sector, according to the Zimbabwe Revenue Authority (Zimra).
Although mining contributes nearly 60 percent of the country’s foreign currency earnings and employs thousands of people, the tax authority believes more revenue could be harnessed to finance national development if players in the sector were fully compliant with tax laws.
Speaking during a mining business breakfast meeting organised by the Professionals Business Association of Zimbabwe (Probaz) in Bulawayo last Friday, a Zimra official, Mr Harold Chipaza, said the tax authority was facing numerous challenges in taxing the mining sector.
“We are facing challenges in taxing the mining sector. These include tax evasion where some players escape the tax liability through concealing, misrepresentation, fraud and other unscrupulous activities.
“We also have a problem of base erosion and profit shifting, trade mispricing and false invoicing,” he said without revealing any names.
In a bid to evade taxation, Mr Chipaza said some mining companies were deliberately thinly capitalised, a practice in which a parent company uses debt to invest in a subsidiary and strips profits through interest payments on a loan rather than repatriating these through a dividend.
He said fraudulent behaviour was rife in some mining companies as evidenced by deletion and concealment of some critical records in order to evade tax.
Mr Chipaza said some mining companies were dipping their hands in smuggling of goods so as to avoid tax.
He said other challenges faced in taxing mining industries had to do with money laundering and the use of tax havens, which require concrete strategies in order to bring the culprits to account.
The situation could be compounded by the proliferation of informal mining activities across the country, whose operations are difficult to track and often happen without records.
During discussion, participants highlighted that the drop in official gold deliveries from 33 tonnes in 2018 to 27 tonnes in 2019, for instance, has more to do with underhand trading of the precious mineral and avoidance of official routes.
However, Mr Chipaza said the tax authority has put in place measures to ensure voluntary compliance by revamping its client education initiatives and continuous improvement of the tax legal framework.
“We are also encouraging transparency and disclosure of tax information and publication of the contributions to the fiscus,” he said.
“We are improving our infrastructure and systems to assist clients to easily comply with tax laws. We are also doing tax investigations in order to plug malpractices.”
To buttress these measures, Mr Chipaza said Zimra has also entered into agreements on information sharing with other jurisdictions including cargo tracking, border patrols, post clearance and enforcement of audits, scanning and the whistle blower facility.
During the discussion, participants stressed the need for policy makers to review the mining and taxation laws to weed out inconsistencies, harmonise and promote data-base linkages. Such efforts also require thorough consultation and reviews by key players.
There is also need to fight corruption. The event was attended by mining executives, consultants, Zimra, Reserve Bank of Zimbabwe and Ministry of Mines and Mining Development officials.
Source: Chronicle