IMPORTANCE OF TAX COMPLIANCE VS PENALTIES
WHAT IS TAX COMPLIANCE?
An illustrious catchphrase which says that, there only two things are certain in life, one of them being taxes. This is quite true given the volatility and complexity of Zimbabwean tax legislation. Even the complexities that is involved in making sure that tax returns are up to scratch is causing people to turn to tax professionals such as MTC for assistance. In this regard, tax compliance refers to taxpayers’ decision to comply with tax laws and regulations by paying tax timely and accurately. In simple terms, it means submitting a tax returns within the postulated period, correctly declaring income received and deductions, paying taxes by due date to (ZIMRA) Zimbabwe Revenue Authority.
Benefits of being compliant
- If an organisation decides to comply with tax systems, pay their taxes it eliminates penalties they were bound to pay after being investigated by the authorities. PART X of the VAT Act deals with compliance in particular section 62 Subsection 2 states that a registered operator (RO) who fails to notify commissioner of ZIMRA of changes in details such as address, is liable for a penalty or conviction to a fine not exceeding a period of one hundred and eighty-one days. Section 57 of the same VAT Act states that RO shall keep records of business transactions such as tax invoices, credit notes, debit notes, bank statements, deposit slips, stock lists and paid cheques relating, import documents among others failure of which will attract a fine not exceeding level seven. It does not make business sense to play tom and jerry with tax authority when a RO is presented with an option to just be compliant and let your business flourish.
- It increases in the entitlement of any registered operator to a refund of tax. All tax refunds are subject to audits before they are being paid out. It is where the tax authority thoroughly investigates of any anomaly. The RO should be up to date in all tax heads and should there be any outstanding issues, the refund will not be processed.
- The money that you pay in taxes goes to settle a number of financial responsibilities. In addition to paying the salaries of government workers, the taxes also help to support common resources such as maintenance of public infrastructure, roads, schools, hospitals. And also, provision of relief in times of disaster.
Main tax offences in Zimbabwe
Below are a fractional of some of the rampant tax offenses committed by RO in Zimbabwe. Each category has different offences that the Tax payer may encounter
- Capital gains offences
- Income Tax, Presumptive Tax and PAYE offences
- Value Added Tax offences
In respect of above mentioned offences, the law has corresponding penalties and fines for the offences. Penalties are a legal or official punishment, such as a fine or forfeit for not fulfilling the required law. Penalties are fines given for not adhering to certain law their differ from different tax paid. They may also come with interest.
Effects of Penalties
- The organisation will need to pay much more money than they were supposed to initially
- Company may shutdown failure to pay the calculated fine.
- A lot of undisclosed issues may be availed during the cause of the investigation and may tarnish the organisation s image to its stakeholders
Tax audit is one of the most effective control mechanisms used by ZIMRA in addressing the problem of noncompliance. There is need for RO to voluntarily comply to avoid so that tax audits which are burdensome and costly.