Innscor Navigates Legal Battle Over Tax Assessment...

Innscor Navigates Legal Battle Over Tax Assessments

Audrey Galawu

Assistant Editor

Innscor Africa Limited is currently embroiled in significant legal battles with the Zimbabwe Revenue Authority over disputed tax assessments.

The case, which revolves around differing interpretations of currency regulations and tax laws, has drawn attention due to the substantial amounts involved and the potential financial impact on the company.

As of now, the company is in ongoing discussions with authorities and challenging ZIMRA’s claims through the court system.

The legal disputes stem from ZIMRA’s assessments covering the period between 2019 and 2021. During this time, Zimbabwe was experiencing rapid changes in its monetary system, with the transition from multi-currency use to the reintroduction of the Zimbabwean dollar.

This shift created widespread confusion in the corporate world about which currency tax liabilities should be settled in.

Innscor is contesting assessments amounting to US$11.749 million, which ZIMRA claims should have been paid exclusively in foreign currency. The company's divisions and subsidiaries had already settled these taxes in Zimbabwean dollars, as permitted by the legal framework in place at the time.

However, ZIMRA's position is that some taxes should have been paid in U.S. dollars, despite the absence of clear guidelines on currency treatment during the transition.

Innscor has objected to ZIMRA’s assessments and is actively challenging them in court. The company argues that its tax settlements were made in compliance with the laws that were effective during the specified periods. It has also raised concerns over the lack of credit for the Zimbabwean dollar payments already made. These payments, due to inflation, are now significantly devalued, leading to concerns that any refunded amounts would have diminished purchasing power.

While the appeals are ongoing, Innscor has paid US$9.262 million under the "pay now, argue later" principle. This payment reflects the company’s compliance with local tax regulations while continuing to dispute the assessments. Innscor has also accounted for these tax payments as prepayments on its financial statements, anticipating a favourable outcome from the courts.

A key issue in the dispute is the ambiguity in the tax legislation during the currency transition period. The absence of clear transitional measures and guidelines has led to various interpretations of tax laws, both by businesses and the tax authorities. Innscor’s case is emblematic of the broader challenges faced by many Zimbabwean companies in navigating these uncertainties.

Despite the legal disputes, Innscor’s financial performance has remained strong. For the fiscal year under review, the company reported a revenue of US$910.065 million, a 13.2% increase over the previous year. Profit before tax grew by an impressive 35%, reflecting the company’s robust operational strength and ability to navigate a challenging economic environment.