HomeBusiness DigestZimra denies delaying UK loan disbursement

Zimra denies delaying UK loan disbursement

THE Zimbabwe Revenue Authority (Zimra) has refused to shoulder the blame for the delay in the disbursement of the US$100 million commercial loan recently advanced by the British government, saying the tax collector does not have the legal mandate to make any tax concessions.

Kudzai Kuwaza

This comes after Zimra was accused of failing to clarify tax issues around the loan deal timeously.

Sources recently revealed that the delay in the disbursement of the fund, which is expected to re-equip companies, increase capacity utilisation and propel the turnaround of the depressed economy has rattled President Emmerson Mnangagwa and Finance minister Patrick Chinamasa.

Zimra chairperson Willia Bonyongwe told businessdigest that the tax collector does not have the mandate to change government policy.

“I need to clarify the impression that Zimra can give a tax status to the loan or has liberties to give any tax concession. Zimra is an agent of government which collects revenue on its behalf and does not enact laws or change any government policy, that is the purview of the policymakers,” Bonyongwe said. “Once tax laws are passed, then Zimra implements them. The ministry of Finance and Economic Development would have conferred the tax status of the loan in the same manner bonds raised by government through the central bank are given attributes including tax status. If government deemed the loan to be tax free there is no way Zimra would insist on collecting revenue from it, but if the structure of the loan is such that it is taxable partly or in full under the current tax legislation then Zimra has no authority to change that”.

Standard Chartered (StanChart) Zimbabwe has been unnerved by a possible tax charge running into millions of dollars for being a financial intermediary in the transaction.

The bank is expected to earn income on the 40% of the total loan which it will provide locally.

The Commonwealth Development Corporation (CDC), the UK’s development finance institution, will handle the other 60% which will be used to fund offshore transactions.

The bank was slapped with a US$3,9 million tax bill a few years ago in an almost similar tobacco offshore loan transaction.

In a letter dated June 18, 2018, seen by the Independent, to Zimra commissioner-general Faith Mazani and copied to Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, StanChart Zimbabwe chief executive Ralph Watungwa sought assurances that the loan not be liable to local charges by the tax collector.

“We are writing to seek your guidance on the tax implications of the recently announced Commonwealth Development Corporation and Standard Chartered Bank Zimbabwe Limited (SCBZL) arrangement which we intend to disburse shortly. The structure is similar to the tobacco offshore loans that resulted in a tax dispute where the bank was compelled to pay US$3,9 million in additional taxes,” Watungwa wrote.

“In a meeting attended by our group financial officer with the Governor of the Reserve Bank of Zimbabwe (RBZ) on the 5th of June 2018, we registered our concerns regarding a potential repeat of the tax dispute referred above. A decision was taken to approach the Zimbabwe Revenue Authority by way of this letter, which we have copied the RBZ governor for alignment, to clear any potential tax issues prior to disbursement of the facilities.”

He said clarification was necessary to avoid disputes which occurred in the past.

Bonyongwe said that since exemptions are done by the ministry of Finance, there could be other reasons for the delay of the disbursement of the fund.

“This loan was in the 100-day action plan but you will see the letter to Zimra was in June or July, which points to maybe other issues probably also delaying the disbursement,” Bonyongwe said.

The financial package is the first direct commercial loan by the United Kingdom to Zimbabwe in more than 20 years.

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