Source: Delta makes mid-term budget policy proposals – herald
Business Reporter
Delta Corporation, the country’s largest beverages firm, has presented a comprehensive set of policy and administrative recommendations to the Government for the upcoming 2025 Mid-Term Policy Review.
The company, which produces popular brands like Coca-Cola and various local beers, underscored the urgent need for corrections to policies that it argues are hindering business operations, stifling growth and impacting consumer affordability.
Among the points raised by Delta is the “route to market” policies, which it asserts have far-reaching negative impacts on access to the market for the Fast Moving Consumer Goods sector and formal retail and wholesale channels.
Delta, whose shares trade on the Zimbabwe Stock Exchange, is advocating for a substantial increase in the Value Added tax (VAT) registration threshold to above US$60 000 per year from US$24 000, arguing this would alleviate compliance burdens, particularly for Small to Medium Enterprises (SMEs).
Delta voiced some reservations about the 5 percent withholding tax on non-compliant traders, saying it has “led to a general increase in prices, higher taxes to the manufacturers and wholesalers that are already in the tax net, compounding the loss of business and increased administrative burden.”
Another critical area of concern for Delta is the legislative framework surrounding the payment of taxes in foreign currency.
The company highlighted the need to address “legacy issues arising from the 2019 currency changes when the Zimbabwean dollar was reintroduced as the sole legal tender.”
Delta said it was critical to ensure that all local currencies introduced by the Government were accepted as legal tender for the settlement of taxes.
The beverage maker said the sugar surtax, which came into effect in February 2024, had significantly impacted its operations.
The company reported that prices of sugar-added soft drinks had increased by between 15 percent to 45 percent, with cordials seeing the highest hikes.
While acknowledging a recent reduction in the cordials taxation rate, Delta highlighted the negative impact, including a “drastic fall in demand and proliferation of lower priced imports from the region.”
“The price moderation is being done in anticipation of a reduction in the tax,” adding that the current practice of manufacturers absorbing the tax through significant discounting is “not sustainable”.
Delta proposed further reduction of the surtax to US$0,0005/gramme and a tiered application, taxing only sugar content above a 4g/100ml threshold, aligning with regional averages and public health objectives without crippling the industry.
The 2 percent Intermediated Money Transfer Tax (IMTT) was singled out as weighing on profitability, with Delta revealing it incurred an average of US$7,5 million in IMTT in the last three years.
The company asserted that this tax “discourages the use of banking services and electronic transactions,” pushing businesses towards “cash-based operations, increasing their vulnerability to theft and armed robbery.”
Delta also called for the tax to be either scrapped or made tax-deductible.
It also cited several operational constraints stemming from the Zimbabwe Revenue Authority’s (ZIMRA) tax administration practices, urging immediate reforms.
The beverage giant highlighted several critical tax administration issues that it contends are hindering business efficiency and creating compliance headaches.
A key area of concern revolves around ZIMRA’s fiscalisation platform and the Tax and Revenue Management System (TARMS).
Delta specifically pointed to challenges in handling credit notes, noting a lack of clear mechanisms for their proper fiscalisation. The company also expressed concern over the integration of the Fiscalisation Data Management System (FDMS) and TaRMS, citing insufficient transitional periods and inadequate training for businesses to adapt to the new systems.
Furthermore, Delta detailed the obstacles created by ZIMRA’s procedural demands.
Businesses are currently limited to using “one nominated bank for all tax payments,” forcing entities to constantly transfer funds between accounts and creating unnecessary administrative burden.
Delta also expressed concern over the issuance of short-dated tax clearance certificates for taxpayers on payment plans, which it claimed can disrupt ongoing business operations and relationships.
The TARMS single payment account has reportedly led to serious reconciliation issues across the tax heads, exacerbated by ZIMRA’s perceived power to virement funds across the tax heads, which Delta argues creates significant challenges in tax compliance.
The company also noted discrepancies in applying the Customs Exchange rates for excise duties, indicating a lack of clarity and consistency in how these rates are applied, particularly for duties payable post-liability date.
These administrative hurdles, as articulated by Delta Corporation, paint a picture of a tax environment ripe for modernisation and greater clarity to support, rather than impede formal business operations in Zimbabwe.
“Multiplicity of audits by various Zimra teams” and “unending requests for information” suggest ZIMRA cannot access its own fiscalisation data or tax returns.
Delta proposed simplifying the taxation of gains from Employee Share Schemes to a flat 5 percent, aiming to encourage employee ownership and reduce complexities arising from currency changes.
Regarding Quarterly Tax Payments (QPDs), Delta stressed the extreme difficulty of forecasting business performance and annual tax bills, leading to “hefty penalties” for underestimation.
The company called for a review of the penalties and mechanisms to offset over-and underpayments across currencies.
Delta also highlighted the ongoing challenge of utilising Government Treasury Bills issued to settle legacy debts.
The company said that “genuine requests for utilising the treasury bills to settle current tax assessments are not being entertained,” causing damaging cash flow problems and viability challenges for many entities.
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