HARARE The cash-strapped Zimbabwe government is losing more than 30 percent of its annual revenue to rampant tax evasion due to "trade mispricing", a new study by a US think-tank showed last week. New research by Washington-based Global Financial Integrity (GFI) shows that Zimbabwe tops the list of countries that recorded the largest tax revenue losses as a percentage of total government income between 2002 and 2006.
The report, entitled The implied tax revenue loss from trade Mispricing, said Zimbabwe lost US$225.11 million through trade mispricing out of expected revenue of US$714.5 million over the five-year period, representing a loss of 31.5 percent.
Trade mispricing is the deliberate over-invoicing of imports or under-invoicing of exports, usually for the purpose of tax evasion. It usually occurs when the trade involves transactions between related parties such as subsidiaries of multi-national companies.
It also occurs between unrelated parties but this is usually a means of externalising money. The report said Zimbabwes financial loss could be much higher than the stated 31.5 percent because the study only covered export under-invoicing and importing over-invoicing while it ignored “same-invoice faking” in which two parties collude.
“As a result of this omission, the final estimates for total revenue loss due to trade mispricing are understated to an undeterminable extent,” the report said. The study findings come at a time Zimbabwes Finance Minister Tendai Biti has bemoaned the poor performance of corporate tax in the countrys taxation system.
Corporate taxes accounted for only US$25.6 million out of the US$685 million revenue collected between January and October last year. This translated to less than four percent of the total revenue.
Post published in: Economy