The government has been struggling to collect enough taxes to fund state operations.
Mostly companies operating in the small-to-medium scale enterprise sector are not registered, and it is difficult to monitor their compliance with statutory obligations.
However, corporate tax remains government’s largest revenue head, which contributed 25,24% to total revenue last year.
During debate in Parliament last Wednesday, legislators requested explanations about the steps that government was taking to improve disclosures on corporate tax inflows.
“I am directing my question to the minister of Finance and Economic Development (Mthuli Ncube).
“We have noted that Zimra (Zimbabwe Revenue Authority) revenue generation and tax expenditure reports are just included as a small summary in the budget statement,” Mabvuku-Tafara member of Parliament (MP), James Chidhakwa said.
“What is the government position on corporate tax disclosure, tax expenditure reporting and making it accessible to the general public given that the report is not even in the public domain?”, he asked.
Zimbabwean legislation and stock market listing rules compel only listed companies to publicly disclose earnings and statutory payments through their financial statements.
The Companies and Business Entities Act is silent on public disclosures by non-quoted firms.
Over 60% of Zimbabwe’s economy is operating informally, according to International Monetary Fund estimates.
And with just 40% of the economy operating formally, there have been concerns that the majority of small to medium scale firms are not in compliance with the Companies and Business Entities Act requirements.
Experts have warned that government could be prejudiced of billions of dollars in revenue annually by firms operating in the informal economy.
Clemence Chiduwa, the deputy Minister of Finance, told legislators that only listed firms were required to make public disclosures under Zimbabwe Stock Exchange listing rules.
“The disclosure of corporate information is guided by the Companies Act,” Chiduwa said.
“In cases where a company is listed on the stock exchange, this is where we can disclose all the information because that is public information, but where we are dealing with a private corporate that is not listed on the stock exchange, we may not divulge the financials to the public.
“It is a requirement under the Zimbabwe Stock Exchange rules that all companies that are listed on the stock exchange (publish) their financials.
“Unless the Honourable member would want those financials to be published specifically by the Ministry of Finance, it is a requirement that all listed companies publish in newspapers.”
After further probing by legislators, Chiduwa said he required further guidance on which companies can make corporate tax disclosures and promised to do more research on the matter.
Sections 183 and 184 of the Companies and Business Entities Act make it obligatory to disclose all financial information of a company within its financial year without a precondition that the firm must be listed.