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Leonard Ncube in Victoria Falls

GOVERNMENT could be losing millions of dollars through tax leakages where big corporations are allegedly transferring their profits to other countries where tax rates are comparably lower, a tax expert has said.

Speaking at a tax conference which opened here yesterday, managing director of Tax Matrix, Mr Marvelous Tapera, said Zimbabwe faces a critical challenge of transfer pricing.

Transfer pricing was one of topical discussion points with accounting and tax experts from various organisations in the country calling for the country to move in line with benchmarking standards.

Mr Tapera said multinational corporations are the biggest culprits as they shift profits to other countries to evade tax.

“By transfer pricing we are talking about shifting profits from one company to the other and multinational corporations do that.

“A research about illicit financial movement was done in 2014 where it was established that the country could be losing millions per year to transfer pricing although I can’t give figures at this stage,” he said.

Mr Tapera said Zimbabwe needs to come up with complete transfer pricing rules in the form of legislation.

“Transfer pricing is very important. Rules were introduced in 2016 but the key thing is that they haven’t been effected as the legislature and tax fraternity are still trying to understand them. 

“Transfer pricing is all about benchmarking which should be enhanced by database,” he said.

A Germany-based professional researcher in Transfer Pricing Documentation, Miss Heather Marwei, said investors were concerned about differences in transfer pricing from country to country hence the need for benchmarking.

She said, for example, the Zimbabwe Revenue Authority demands documents within seven days from request date by the commissioner while in countries like South Africa the period stretches to 21 days.

Miss Marwei said some organisations shift profits to evade tax by creating mergers where liabilities are transferred to one entity thereby leaving the owing company with no obligation to the tax authority.

During deliberations, delegates bemoaned lack of transparency in the relationship between Zimra and its clients hence tax  evasion.

A Zimra official, Mr Mkhululi Nkulumo, who was representing the tax authority Commissioner General Mrs Faith Mazani, said efforts were being made towards establishing a mutual relationship.

He said Zimra is pushing for co-operative compliance which should be beneficial to tax payers.

The two-day conference, which has more than 100 delegates, ends today and is being held under the theme: Building sustainable tax systems for strong economies.”

Mr Tapera said the conference is a befitting platform to bring awareness to the tax regime and create opportunities for people to rethink the development of tax policies and attract investors. — @ncubeleon