The Zambia Revenue Authority (ZRA) has allegedly been fraudulently misreporting its revenue collection targets and using the VAT Refund Account to prop-up its position, a whistleblower letter sent to the Ministry of Finance has revealed.
And the letter which is authored by ZRA employees says First Quantum Minerals (FQM) is apparently one of the most compliant mines in the country, despite ZRA’s claim of having uncovered a tax evasion scam back against the mine in March this year.
Meanwhile, ZRA employees say companies are being unfairly squeezed out of liquidity as a result of the Authority’s VAT refund manoeuvres.
The correspondence addressed to Finance Minister Margaret Mwanakatwe, and copied to the Secretary to the Treasury as well as Office of the Auditor General, among others, the Authority has allegedly been fraudulently propping up its position by misreporting its revenue collection targets using the VAT Refund Account.
The open letter, which was received at the Ministry of Finance on October 17, 2018, revealed that the Authority had been diverting money meant for VAT Refunds, and reporting the same as revenue collected for the purposes of meeting monthly targets.
“We wish to bring to your urgent attention the fraudulent misreporting of revenue collections by the ZRA, and that this has been the norm since April, 2017, and it will soon implode,” the letter, obtained by News Diggers! reads.
“ZRA, due to consistency in failing to meet its revenue collection targets, has been diverting money meant for VAT Refunds and reporting the same as revenue collected for purposes of meeting monthly targets. Persons in VAT refund positions have gone unpaid for several months now and in the meantime, ZRA has misled the Ministry of Finance that VAT was the best performing tax type.”
The letter also revealed how the ZRA had allegedly been manipulating revenue collection records by diverting VAT refunds.
“On the other hand, Kingsley Chanda as Commissioner General in consortium with Bridget Muyenga as Commissioner Finance and Benjamin Simpungwe as Director Treasury have been manipulating the revenue collection records by simply diverting VAT refunds into the Bank of Zambia Revenue Account (control 99) without express authority and knowledge of the Ministry of Finance,” the letter disclosed.
And the employees claimed that FQM is one of the most compliant mines in the country, contrary to the ZRA’s allegations of having uncovered a tax evasion scam.
On March 20, 2018, ZRA announced that it had uncovered a tax evasion scam in which Kalumbila Minerals Limited, an FQM subsidiary, allegedly evaded paying taxes worth K76.5 billion.
An update on the alleged tax evasion scam involving Kalumbila has, however, not been issued since then, despite several stakeholders querying the Authority.
“The failure to meet revenue target has also led to the Commissioner General (CG) with his senior management to scheme up bogus assessments, such as the one lumped on FQM. Although the CG rushed to the media to announce the ‘big catch,’ in essence, the assessment on the mine was without proper ascertainment of the veracity of the figures and, neither did he wait for a response from the named mine before making the grandiose announcement,” it stated.
“As a matter of fact, FQM is one of the most compliant mines in Zambia and does not owe ZRA a penny in taxes and to this end, has furnished us with evidence to that effect. Already, the mine has deposited documentation showing that money amounting to K4 billion of the bogus K7 billion was paid and they have further asked for some time to produce further evidence to show that they do not in fact owe the Treasury the hyped K7 billion.”
The ZRA employees further complained that those who objected to the methods of operating were being victimised.
Meanwhile, the employees also revealed that companies are being unfairly squeezed out of liquidity as a result of the Authority’s manoeuvres, among other effects.
“What has been happening since April, 2017, is that ZRA has been utilising the VAT Refund Account to prop-up our dismal collections and consequently portraying to the government and the public at large as though VAT was the best performing tax type. This is an incorrect position. The correct position is that all the tax types with the exclusion of PAYE [Pay As You Earn], for obvious reasons have been underperforming,” read the letter.
“The effect this has on the economy of the country is mainly two-folds and namely: 1. Companies are being unfairly squeezed out of liquidity and as a result, the companies are forced to shelve their expansionary investment and commercial activities, thereby, denying the nation the much-cried for jobs and consequently taxable incomes, which would inevitably accrue to such activities. 2. Government’s austerity efforts been undermined in that the national Treasury is now spending these borrowed funds (VAT refunds) as though they were not borrowed funds. This also means that government budget is impaired by these unplanned borrowings…”
They further appealed to Mwanakatwe for her Ministry to intervene in the matter.
“There current VAT position should not be mistaken or mixed with that of Rule 18 on Export VAT refunds, which was a legitimate refund dispute based on the now revised Rule 18. There is a lot going on at which we may not express in this letter, but we will be willing to do so if given an opportunity. We appeal to our motherly Ministry to seriously do an audit into the goings at ZRA as the morale of the staff is at the lowest it has ever been,” concluded the employees, signed, “yours in national service.”