A voluntary disclosure programme (VDP) is a mechanism frequently used by governments to encourage individuals and businesses to come forward and reveal their income and assets without fear of being penalised, imprisoned, or otherwise punished. It may be used to mitigate the negative consequences of “moral hazard” and “adverse selection.” It increases the confidence of external investors in management by lowering the agency’s costs. This article focuses on the most recent voluntary disclosure program published by the Commissioner General of the Zimbabwe Revenue Authority in Public Notice 55 of 2023.
The Commissioner General is encouraging all persons, individuals, and corporations to review their business or personal affairs and make voluntary disclosures if there is any income omitted from tax returns submitted or if the taxpayer has not complied with any tax obligations. The goal is to encourage voluntary compliance, which will improve smooth corporate operations and/or social life continuity in the absence of ZIMRA disturbances.The candidates of the voluntary disclosure as outlined in the public notice include: persons who have constructed houses that cost USD100,000 or more, persons who have traded or are trading in gold or other minerals, owners of luxury motor vehicle of value of at least USD150,000, owners of private jets or lessors of private jets, middlemen or agents of goods manufactured in Zimbabwe, transport operators and taxi operators and individuals or companies who have constructed buildings with a value of at least USD100,000 or more. The public notice further provides that any person who has earned any income, through business/trade, which is subject to tax should ensure that taxes due are paid. Value Added Tax, Income Tax, Capital Gains Tax, and Pay As You Earn would be among the taxes covered. In order to make a voluntary disclosure, taxpayers must furnish schedules describing the overdue taxes, complete the outstanding returns, and pay the tax due, or engage ZIMRA to make payment arrangements. However, voluntary disclosure does not exempt taxpayers from paying interest, which remains taxable to the amount authorized by law. Where full and complete declarations are made, the Commissioner shall give proper attention to fines liable. The submission of a full voluntary disclosure shall not trigger an audit. Applicants are expected to shall the voluntary disclosures within 30 days from the 31st of August 2023, after the stipulated timeframe the window will expire.
Authentic tax reporting and prompt payment of tax dues are the cornerstones of a voluntary disclosure to avoid penalties, fines, and incarceration. The following are the benefits of making a voluntary disclosure under the voluntary disclosure program: penalties, civil penalties, fines, and additional tax will be waived in full; outstanding tax debts are paid on agreed payment terms; businesses are free from the burden of non-compliance, so there is no need to play hide and seek; they will have access to tax clearances certificates for compliant taxpayers and business managers and owners can focus on running their businesses thereby reducing costs of compliance and applicants are assured that information voluntarily disclosed shall not trigger an audit, investigation or prosecution. After a voluntary disclosure a taxpayer should adhere to the terms of the contract made with the revenue authority, if one fringes the agreement made it shall be considered as a breach and the voluntary disclosure benefits shall be declared null and void. The benefits will be withdrawn by the revenue authority without seeking alternative payment arrangements.
Taxpayers are encouraged to ensure that any imbalance in their tax affairs have been addressed. We expect the ZIMRA to be harsher after 30 days when it conducts major tax audits to uncover tax evasion or unreported taxes. In practice, voluntary declarations must be honest in order to be exempt from fines and interest. Taxpayers should consequently conduct a full examination of their affairs before proceeding, and this should be done with the assistance of a tax expert. One can posit that; Zimra administration should have granted more time than the current 30-day window period in this regard so as to give taxpayers time to track their records and also consult tax agents. Furthermore, the Commissioner General should have been more conciliatory in terms of penalty waiver. It is unclear whether it will be completely waived or partly waived. Without this assurance, there may be no incentive for voluntary disclosure as taxpayers will be worried of the repercussions of calling a spade. It is also critical that the relief provided by the VDP be fair and not reward individuals or corporations looking for a way to avoid taxes as this will disturb those that are compliant in their tax payments. To be fair to everyone, the revenue authority should grant greater assistance to persons who are correcting an accidental error than those who actively evaded paying their taxes only to use the VDP.
To put it briefly, voluntary disclosure should be treated seriously for a variety of reasons. First, the statement comes soon after the end of general elections, and second, there has been an extraordinary increase in informal sector commerce, which has fostered revenue leakages, which the country is attempting to fix in order to increase the tax base.