TAX MATTERS: Tax deferments necessary to save businesses

THE Covid-19 pandemic has caused several disturbances and serious disruption to business, not mentioning its impact on people’s lives throughout the globe. There are several measures some countries including Zimbabwe have undertaken in order to reduce its impact on people and business.
What appears missing for Zimbabwe is the most immediate and critical government intervention measure to address cashflow challenges currently facing most firms, which is affecting their ability to honour current tax debts to the Zimbabwe Revenue Authority (Zimra).
Henceforth, some businesses have since filed applications for tax deferments but with little success.
As part of mitigating the effects of Covid-19 on already stretched companies, the minister of Finance through a press statement made on March 30, 2020 provided for the tax regulator to process requests for extension of the period within which tax is payable without accruing penalties and interest.
This seems to suggest that the government is not prepared to give a blanket moratorium on tax deferments but to consider the applications on a case by case basis because it also needs the money.
It, however, appears even the granting of tax deferment is not happening on the ground.
In the normal course of business, failure by taxpayers to pay for their tax obligations leads to interests of 25 percent per month or any part thereof, as revised in the Finance Act no 3 of 2019 (Chapter 23:04) and also 100 percent penalty on the tax liability.
When a tax deferment application is denied, it implies that the business cannot be guaranteed that there will be no consequence of an unapproved deferment thereby causing a lot of uncertainty.
While it is appreciated that the government needs cashflow to pay for its recurrent and further expenditure brought about by Covid-19, our view is that where a genuine cash flow challenge is presented by a taxpayer, it is in the interest of the taxman to allow such deferment.
The cost is much bigger going forward, businesses straddled with debts are likely to shut down resulting in retrenchments which have the effect of placing a huge burden on the government.
We have seen daily the local authorities and the vendors playing the catch and mouse game, and it’s all because there are no jobs for these people.
The situation will be compounded this time around because Covid-19 is affecting the whole world. For Zimbabwe, its people in the diaspora have already started coming back into the country putting a further strain on the economy.
More people will need recuse packages which will come at a cost should the government fail to take timely and necessary intervention measures.
A month of lock down has already witnessed casualties with some businesses not affording to honour their April 2020 salaries, others paying 50 percent or some other percentage of those salaries, some retrenchments have already taken place while some companies within the tourism and hospitality sectors have already announced business closure for the next three months. Everyday companies are weighing options on whether to retrench in order to survive or not.
We all don’t know when this Covid-19 pandemic will end and companies are taking serious contraction measures.
If a total moratorium of payment of taxes cannot be achieved, we implore Zimra to consider all genuine Covid-19 cash flow constrains and grant extension where the case permits.

A blanket denial of the requests for extensions is not beneficial to both the fiscus and the taxpayer. There is life after Covid-19 and it is important to help businesses to make it through this period and beyond by granting fiscal relief to businesses in order to save jobs.
While the efforts by the authorities such as the deferment of the submission of the ITF 12C for 2019 and customs rebates granted on some products are much appreciated, tax deferments are much more important because they relate to the current situation.
Meanwhile, we implore the government to also consider announcing an employment tax holiday or incentives of some sort.
For example, a measure such as exempting PAYE on at least 50 percent of employee earnings for a period of three months starting April 2020, linked to job retention may go a long way in saving jobs. This has a much wider and positive effect to the nation compared to the selective rental moratorium measure discussed above.
PAYE is a more direct cost to the business whereas rentals can be negotiated or one can seek alternatives. By Marvellous Tapera

●Tapera is the Founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity.