AS the cash crisis deepens, the Zimbabwe Revenue Authority (ZIMRA) has launched an unprecedented blitz on defaulters, going as far as raiding bank accounts of companies with tax arrears, as Treasury leans heavily on its revenue-collecting arm to ensure things do not fall apart in government, the Financial Gazette can exclusively reveal.
With virtually nothing trickling into government coffers from other sources such as aid, grants or balance of payments support, Treasury is now heavily reliant on ZIMRA to extract every little penny they can get to sustain operations.
A priority for government has been to raise enough cash to fund salaries for its 553 000 strong workforce.
Given the spectre of demonstrations that rocked the country in recent weeks, with the highlight being the riotous behaviour of prisoners at Chikurubi Maximum Prison which claimed the lives of five people, government is desperate to forestall any potential for discord among its employees.
With Treasury breathing hard down on their necks, ZIMRA officers have been pouncing on all those with outstanding obligations to the authority.
Government is owed over US$1 billion in outstanding taxes by companies, some of which have collapsed due to an economic crisis in the country.
A number of companies have had their bank accounts raided in the last few weeks on the strength of garnishee orders issued by ZIMRA to the financial institutions to enforce compliance.
The country’s largest industrial lobby group, the Confederation of Zimbabwe Industries (CZI) confirmed this week that a number of their members had their accounts garnished over outstanding tax payments since the beginning of this month. “Our members have complained about their accounts being raided by ZIMRA. We believe ZIMRA should agree payment terms with them because raiding them would result in company closures,” said Charles Msipa, CZI president.
“The exercise should be done in a manner that (allows) for production and survival of the companies for government to collect more. If done in a manner that would result in company closures it will not do anyone any good. But what needs to be addressed is government expenditure, which is the main reason for this aggressive drive,” he said.
Bank executives who spoke to the Financial Gazette this week said ZIMRA officers were demanding files for the targeted institutions.
The executives observed an increase in the number of garnishee orders on company accounts in recent days as the tax collector tries to force payment of tax arrears.
The blitz comes ahead of the expiry of a tax amnesty at the end of this month.
The tax amnesty, which became effective on October 1, 2014, was expected to grant reprieve to tax defaulters in respect of non-compliance, which occurred during the period beginning February 1, 2009 and September 30, 2014.
The tax amnesty period was meant to allow taxpayers with outstanding obligations to voluntarily inform ZIMRA about their positions.
ZIMRA commissioner-general, Gershem Pasi, has warned that if the conduct of the authority in the past had been interpreted as merciless, then it was going to be more ruthless to tax cheats and defaulters after the expiry of a tax amnesty.
Last month, Pasi lamented the fact that only a few companies had volunteered to inform ZIMRA about their outstanding tax obligations, saying those that had chosen to ignore the tax amnesty should not regret the consequences of any action likely to be meted out against them for tax delinquencies.
It would appear the gloves are already off, even before the expiry of the tax amnesty.
Treasury is already under pressure to raise funding for salaries this month, after revenue shrunk to unprecedented levels due to the worsening economic situation in the country.
Revenue inflows have suffered as companies continue to bleed due to a combination of depressed consumer demand and high operational costs.
Over 4 500 companies collapsed between 2011 and 2014, leaving over 55 000 workers stranded, according to official statistics.
Persistent liquidity challenges, lack of sufficient credit lines, high cost of utilities and frequent power disruptions have combined to worsen the country’s economic situation and consequently undermine government revenues.
Treasury has already been forced to revise downwards the 2015 National Budget from US$4,1 billion to US$3,5 billion, just over a month into the new year.
But critically, over 80 percent of government expenditure is going towards salaries.
Msipa said government had to rein in its expenditure and create a conducive environment for companies to flourish.
“They have to review their expenditure in line with the economic situation, which is translating to low tax collections. Engineering a turnaround of the economy could begin with having a review of government expenditure,” he said.
It would appear the pressure is finally forcing government to act on its salary bill.
This week, the Public Service Commission chairman, Mariyawanda Nzuwa, said a committee had been set up to explore avenues through which government could reduce its salary bill.
The committee is headed by Finance Minister Patrick Chinamasa, who confirmed last week plans to reduce the salary bill but declined to give details.
Economist, Joseph Sagwati, said there were revenue leakages within the ZIMRA system which needed plugging.
Another economist, Brains Muche-mwa, said there was need for government to re-look at its expenditure.
“Government should streamline its expenditure in line with obtaining revenue streams,” he said.