Understanding the implications of Zimbabwean tax collection measures requires an appreciation of a taxpayer’s obligation and the extent of the Revenue Authorities’ administrative powers. From the point of assessment by the Revenue Authority, a taxpayer needs to navigate the complex tax provisions to ensure both compliance and protection of its rights. Tax collection measures are often complex and intimidating for most taxpayers. This article discusses the pay-now-argue-later principle focusing on taxpayers’ rights and obligations when the Revenue Authority commences tax collection measures after an assessment.
The pay-now-argue-later principle is a tax collection measure tax authorities use when taxpayers have a tax liability owed after an assessment by the Revenue Authority. The primary purpose of the principle is to assist the Revenue Authority in securing payment where there are disputed tax amounts. A self-assessment usually does not give rise to the pay-now-argue-later principle. The principle applies in cases where a notice of assessment is given by the Commissioner and only then will ZIMRA be able to proceed with a recovery of the taxes through the appointment of an agent or any other means. Without an assessment, the Commissioner’s only remedy is to sue in a court of law. This approach differs procedurally from commercial matters in that a court has to adjudicate a matter before a judgment debtor makes payment to the judgment creditor. In tax matters, a taxpayer should pay the Revenue Authority on the assessment before or whilst the objection and appeal processes are ongoing. Should the taxpayer be successful in the legal process, it qualifies for an adjustment of all the amounts it had paid towards the tax liability if it is in excess.
The taxpayer is not without recourse when they have been issued with a notice of assessment by the Revenue Authority. The taxpayer can make an application to the Commissioner for the suspension of the pay-now-argue-later principle. In terms of the relevant statutes, the Commissioner has powers to direct that the payment or collection of taxes be suspended pending determination of the objection or appeal filed by a taxpayer after the notice of assessment has been issued. This provides an opportunity for the taxpayer to engage the Commissioner and request for the suspension pending the determination of the tax dispute. However, the Commissioner may still refuse to suspend the payment of taxes pending the determination of the objection or appeal. In that case, the taxpayer may make a court application for review of the Commissioner’s decision to refuse suspension of payment. This application to the High Court does not however suspend the pay-now-argue-later principle. Therefore, unless the taxpayer has a strong case of unfair administrative action by the Revenue Authority, it would not help the taxpayer to escalate the matter to the High Court when the obligation to pay has not been suspended.
Another available course of action is that the taxpayer can file a payment plan for the outstanding tax liability for both the principal amount, penalties and interest with the self-service portal called the Tax and Revenue Management System (TaRMS). The payment plan should be supported by cash flows. Once accepted, the payment plan suspends any collection measures by the Revenue Authority pending the settlement of the tax dispute. However, if the taxpayer fails to file the payment plan or make payment towards settlement of the tax liability then the Revenue Authority may appoint any person, including a commercial bank of the taxpayer, as an agent of the taxpayer. The agent will be required to pay the tax from the money held on behalf of the taxpayer or which is due to the taxpayer in terms of a contract or other arrangement. Consequently, adhering to tax laws is truly a delicate balancing act for the taxpayer, with multiple processes running parallel to each other.
In conclusion, taxpayers should be aware that legal processes do not suspend any collection measures unless an application for suspension of payment has been accepted by the Commissioner General. It is important to stay informed about tax obligations and seek professional tax assistance after a notice of assessment has been issued. Additionally, engaging the Revenue Authority by filing an acceptable payment plan can waylay any collection measures, allowing the taxpayer to manage their cash flow and to exercise their right to appeal if that is the route chosen.