Zimbabwe’s tax system is built on the principle of legal finality, offering a six-year prescription period within which the Zimbabwe Revenue Authority (ZIMRA) may issue tax assessments. This statutory limitation is intended to bring closure and certainty to both taxpayers and the fiscus. However, this assurance is being steadily eroded by an expansive interpretation of a single concept “misrepresentation”. While the law allows ZIMRA to lift the prescription period in cases involving fraud, willful non-disclosure, or misrepresentation, recent court rulings have redefined “misrepresentation” so broadly that even honest mistakes or innocent errors now fall within its scope. As a result, the supposed six-year protection has become an illusion, opening the door for ZIMRA to revisit tax years long considered closed.
The High Court has ruled decisively on this issue in several landmark cases. In Bath Ltd v ZIMRA HH 552 of 2020, the court found that it was immaterial whether the taxpayer acted willfully or innocently what mattered is that the statement in the return was false in substance and effect. This ruling essentially disarmed taxpayers of the defense of good faith or honest mistake, creating a legal environment where even the most cautious and compliant taxpayer can never be completely certain their previous tax years are truly closed. This view was echoed in MAN v ZIMRA HH 552-20, where the court held that to qualify the term misrepresentation with any state of mind such as “willful” would render the term meaningless. The implication is that any incorrect statement, regardless of intent, can be grounds for re-opening prescribed periods. The decision in SZ (Pvt) Ltd v Zimra HH 142/2020 reinforced this reasoning, noting that misrepresentation includes incorrect statements that are prejudicial to the fiscus and even covers conduct that does not rise to the level of fraud or willful concealment. These cases collectively establish a disturbing precedent: tax years are never truly closed if ZIMRA can retrospectively challenge any return based on error, regardless of how it arose. This legal environment creates a climate of perpetual uncertainty, particularly problematic for long-term investors and businesses requiring predictability and closure in their financial planning.
No investor wants to operate in a jurisdiction where tax obligations from decades past can suddenly resurface due to an unintentional reporting error. This undermines trust in the tax system and deters both foreign and local investment. The underlying policy intent to protect the fiscus from material revenue loss is understandable, but its application in this unqualified manner causes disproportionate harm to taxpayer rights. It effectively renders the statutory prescription period toothless. Taxpayers must now take a far more defensive approach to compliance. Beyond simply submitting accurate returns, they must retain robust documentation, maintain consistent tax records, and consider pre-filing tax opinions or rulings where ambiguity exists. They must also establish strong internal controls and ensure that knowledge of historical tax positions is preserved despite staff turnover. Even small clerical errors or misunderstood legislative provisions could now be reclassified as misrepresentations. With these precedents in place, there is an urgent need for legislative clarification.
The prescription rule should be restored to its original purpose, to draw a line under historical tax periods and promote legal certainty. One possible reform would be to define “misrepresentation” to apply only to material misstatements made negligently or intentionally. Without such reform, the tax system risks becoming arbitrary, punitive, and incompatible with sound principles of tax administration. Until then, Zimbabwe’s tax law carries a hidden time bomb an exception that not only overrides the prescription rule but has turned what should be a statute of limitations into an open-ended threat, one that every taxpayer should be acutely aware of.