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Zimbabwe Firm Challenges ZIMRA's Power to Effect Tax Garnish Order

  • Blessing  Zulu

Most companies are struggling to generate revenue due to the depressed local economy.

Most companies are struggling to generate revenue due to the depressed local economy.

In a landmark case before the Constitutional Court with far reaching implications for government revenue, the Zimbabwe Revenue Authority’s move to garnish companies’ bank accounts without a court order is being challenged by Packers International, owners of Chicken Slice and Pizza Slice.

ZIMRA collects government revenue and because the government is cash-strapped, it has been under pressure to widen the net.

ZIMRA has been missing target revenue collections due to the shrinking formal economy.

In July, ZIMRA missed the target revenue collection by 6% after collecting US$1,66 billion for the first half of the year due to the shrinking formal economy. The target was US$1,76 billion. Net collections declined by 3% from the same period last year when US$1,72 billion was collected.

In a statement accompanying the revenue performance report for the first half of 2015, ZIMRA chairperson Willia Bonyongwe said the first half of the year was characterized by challenges such as liquidity constraints, limited lines of credit from financial institutions, power shortages, retrenchments and company closures which affected economic performance.

“The shrinking of the formal economy has led to the growth of the informal sector whose contribution to revenue is not significant. Such challenges have seen some clients failing to honor their tax obligations, resulting in the authority failing to meet the set target for the first half of the year,” said Bonyongwe.

Constitutional law expert Lovemore Madhuku told VOA Studio the case is interesting.

“It’s an interesting case that is testing the constitutionality of the kind of action that ZIMRA takes. It will depend on how the court will determine the powers of ZIMRA but people should quickly realize that when it comes to revenue collection the constitution will bend slightly in favour of the tax authorities.”

Most companies are struggling to generate revenue due to the depressed local economy. Some are even failing to pay taxes because of operational problems.

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