ZIMBABWE’s filthy rich tycoons, Zanu PF bigwigs and wheeler-dealers, who live in lavish mansions sprawling across vast acres of space with landscaped surroundings and drive luxury cars, face a lifestyle audit by the Zimbabwe Revenue Authority (Zimra) as it prepares to crack down on tax evaders in a bid to raise more revenue as Treasury goes bankrupt.
Faith Zaba/Owen Gagare
Senior Treasury and Zimra officials told the Zimbabwe Independent this week authorities were drawing a “battle plan to combat tax evaders who flaunt their riches but cannot account for the money sources and tax payments”.
“Come March 31, we are going to first go after the rich and famous. No amount of political protection will shield anyone found to be evading tax. People hide behind politics and connections, but this time it won’t work,” a senior Zimra official said this week.
“We are just going to go after all those people building palace-like houses; by that I mean lavish mansions that you see on hilltops and along the plush Borrowdale’s Carrick Creach Road and Glen Lorne’s Folyjon Crescent, Umwinsdale, Chishawasha Hills and Borrowdale Brooke. We want to know where they are getting the money from and whether they are paying tax.”
Zimra also plans to swoop down on people’s bank accounts and demand its tax dues.
Officials said Zimra would be auditing the rich’s living standards to see if they are consistent with their known incomes.
The lifestyle audits would involve forensic inspections to determine if the lifestyle of an individual is consistent with their known income stream.
Companies and individuals have been given up to the end of this month to apply for an amnesty during which they should regularise their tax arrears incurred from February 1, 2009 to September 30, 2014.
The amnesty period covers taxes and irregularities on taxes administered by Zimra, among them employee tax, income tax, value-added tax, withholding taxes, presumptive tax, capital gains, customs and excise duty, licences for bonded warehouses and private sidings, royalties and other fees.
Zimra’s audit, meant to smoke out individuals and companies dodging tax, is expected to net tycoons, ministers, Zanu PF bigwigs, security chiefs, senior government officials and private sector executives as well as wheeler-dealers if it not thwarted in the corridors of power.
Already Treasury officials fear Zimra’s crackdown might be frustrated like last year’s campaign to clamp down on disproportionate high salary earners at state enterprises and parastatals exposed by the media.
The Zimra move comes at a time government – struggling to meet its public sector wage bill and other obligations – is facing a tough 2015 as its revenue base continues to shrink as companies close down and workers lose jobs on a massive scale. Government is planning to retrench workers and streamline its structures.
Zimra has had to resort to such stringent measures after a low uptake of the tax amnesty by individuals, companies, corporates and trusts. The amnesty targets individuals, companies, corporates or incorporated bodies of persons and trusts, who can apply to regularise their affairs and by doing so would be granted relief on penalty, interest and prosecution.
Ministers and other top state officials will particularly sweat to explain their dodgy wealth. Their material fortunes often get exposed during divorce cases as was the case with Local Government minister Ignatius Chombo when he split with former wife Marian, and Zimbabwe Defence Forces commander General Constantine Chiwenga’s break-up with Jocelyn.
In Chiwenga’s case, the judgement in the divorce exposed the vast amount of wealth which the Chiwengas have accumulated over the years, underlined by costly real estate in Harare’s affluent suburbs and an apartment in Malaysia, top-of-the-range vehicles, an expensive collection of jewellery and farms.
In their messy divorce, Marian spilt the beans saying Chombo and herself owned businesses, farms, homes and residential stands in Harare’s leafy suburbs of Mt Pleasant, Alexandra Park, Greendale, Borrowdale and other towns around the country, luxury cars and vast tracts of land, among other assets.
According to a salary schedule shown to parliament last year, ministers earn about US$3 000 per month but the lifestyles they lead are inconsistent with their means as was pointed out in 2003 by the late Zanu PF veteran Eddison Zvobgo.
President Robert Mugabe says he earns US$12 000 a month.
Calling for the setting up of an anti-corruption commission in parliament, Zvobgo said Zanu PF leaders had built mansions which he described as “obscene”, and lived beyond their means.
The Zimra clampdown is not just going to affect the powerful but also ordinary people.
“Any person who earns more than US$250 has to pay tax. We don’t care how or where the money is coming from but as long as it is an earning, a person is obliged to pay tax,” another Zimra official said.
For the crackdown to succeed, Zimra would need Mugbe’s steadfast backing as corruption barons often fight back fiercely. Efforts to clampdown on parastatal bosses and local authorities over astronomical salaries were met with determined resistance and seem to have flopped so far.
There were reports in the media this week Harare city council bosses continue to receive huge salaries, and resisted accountability demands by parliament.
Very few people and companies have taken advantage of the tax amnesty which has been in place since October last year, Zimra officials say. As at February only 1 471 defaulters had submitted tax amnesty applications out of a target of not less than 10 000 individuals.
“The amnesty was designed to attract those who defaulted between February 2009 and September 2014 to make them tax compliant at no extra costs,” a Zimra official said. “We are under pressure from government to collect revenue but as we all know the liquidity crunch has resulted in the closure of many companies and therefore a reduction in a variety of taxes.”
Zimra’s net collections for 2014 were US$3,6 billion against a target of US$3,82 billion, a negative variance of 6%. Fourth quarter net collections were US$996,94 million against a target of US$1,1 billion, translating to a negative variance of 10%. Revenue collection was particularly poor in the fourth quarter of 2014, and the trend is expected to continue in 2015.