Harare, Zimbabwe – Beverage giant Delta Corporation has laid out a comprehensive set of recommendations for the upcoming 2025 Mid-Term Policy Review, urging the government to address policies it believes are stifling business growth and impacting consumer affordability. The company, known for popular brands like Coca-Cola and various local beers, emphasized the urgent need for corrections to current regulations.
Key Policy Hurdles for Delta
Delta highlighted several critical areas hindering its operations and the broader Fast Moving Consumer Goods (FMCG) sector:
- Route to Market Policies: The company argued that existing “route to market” policies are negatively impacting market access for FMCG and formal retail and wholesale channels.
- VAT Threshold: Delta is advocating for a significant increase in the Value Added Tax (VAT) registration threshold from US60,000 annually. This, they argue, would ease compliance burdens, especially for Small to Medium Enterprises (SMEs).
- Withholding Tax: Concerns were raised about the 5 percent withholding tax on non-compliant traders, which Delta claims has led to increased prices, higher taxes for compliant manufacturers and wholesalers, and an increased administrative burden.
- Foreign Currency Tax Payments: Delta stressed the importance of addressing “legacy issues” from the 2019 currency changes and ensuring all local currencies introduced by the government are accepted for tax settlements.
- Sugar Surtax: The sugar surtax, introduced in February 2024, has significantly impacted operations, leading to price increases of 15 to 45 percent on sugar-added soft drinks and cordials. While acknowledging a recent reduction in the cordials tax rate, Delta noted a “drastic fall in demand and proliferation of lower priced imports.” The company proposed a further reduction of the surtax to US$0.0005/gramme and a tiered application, taxing only sugar content above a 4g/100ml threshold.
- Intermediated Money Transfer Tax (IMTT): The 2 percent IMTT was singled out as a drain on profitability, with Delta incurring an average of US$7.5 million in IMTT over the last three years. The company asserted that this tax discourages banking services and electronic transactions, pushing businesses towards cash, increasing their vulnerability to theft. Delta called for the tax to be scrapped or made tax-deductible.
ZIMRA Administrative Challenges
Delta also brought to light several operational constraints stemming from the Zimbabwe Revenue Authority’s (ZIMRA) tax administration practices, pushing for immediate reforms:
- Fiscalisation Platform and TaRMS: Challenges with ZIMRA’s fiscalisation platform and the Tax and Revenue Management System (TaRMS) were highlighted, particularly regarding the handling of credit notes and the integration of the Fiscalisation Data Management System (FDMS) and TaRMS, citing insufficient transitional periods and inadequate training.
- Procedural Demands: Delta criticized the requirement for businesses to use “one nominated bank for all tax payments,” which necessitates constant fund transfers and creates unnecessary administrative burden.
- Short-Dated Tax Clearance Certificates: The issuance of short-dated tax clearance certificates for taxpayers on payment plans was noted as disruptive to business operations.
- TaRMS Single Payment Account: The single payment account on TaRMS has reportedly led to serious reconciliation issues across tax heads, exacerbated by ZIMRA’s perceived power to reallocate funds, creating compliance challenges.
- Customs Exchange Rates: Discrepancies in applying Customs Exchange rates for excise duties, especially for duties payable post-liability date, were also raised.
- Audits and Information Requests: Delta suggested that “multiplicity of audits by various Zimra teams” and “unending requests for information” indicate ZIMRA cannot readily access its own fiscalisation data or tax returns.
Other Recommendations
- Employee Share Schemes: Delta proposed simplifying the taxation of gains from Employee Share Schemes to a flat 5 percent to encourage employee ownership and reduce complexities arising from currency changes.
- Quarterly Tax Payments (QPDs): The company stressed the difficulty of forecasting business performance for QPDs, leading to “hefty penalties” for underestimation. They called for a review of penalties and mechanisms to offset over- and underpayments across currencies.
- Treasury Bills: Delta highlighted the ongoing challenge of utilizing Government Treasury Bills issued to settle legacy debts, stating that “genuine requests for utilising the treasury bills to settle current tax assessments are not being entertained,” causing cash flow and viability problems for many entities.
These administrative hurdles, as articulated by Delta Corporation, underscore the need for modernization and greater clarity in Zimbabwe’s tax environment to support formal business operations.