Delta faces US$255 million tax bill

Philemon Jambaya

Zim Now Editor

Zimbabwe's leading beverage manufacturer, Delta Corporation Limited, is facing a significant financial hurdle with a potential tax bill exceeding US$255 million looming over the next fiscal year. This mounting liability stems from the impact of the sugar tax introduced in 2024 and ongoing tax disputes with the Zimbabwe Revenue Authority.

The sugar tax, initially set at a steep US$0.02 per gram of sugar content in beverages, was subsequently reduced following industry-wide protests. Despite the reduction, Delta incurred US$31.2 million in sugar tax payments between February and December 2024. This figure aligns with Finance Minister Mthuli Ncube's announcement that Treasury collected US$31 million from the sugar tax last year.

Adding to Delta's financial woes are ongoing tax disputes with Zimra. The company is contesting tax assessments amounting to US$73 million, encompassing penalties and interest related to value-added tax and income tax from 2019 to 2022. Delta contends that these assessments fail to acknowledge prior local currency payments, significantly devalued by the country's rampant inflation and currency depreciation.

Despite facing adverse court rulings, Delta is actively pursuing appeals and new legal challenges in various courts, including the Constitutional Court.

Furthermore, Delta has already paid US$9.2 million in taxes based on the "pay now, argue later" principle and existing payment plans. Assuming the company incurs similar existing tax obligations as the previous fiscal year – approximately US$142 million – the total tax burden could easily surpass US$255 million.

The sugar tax and these tax disputes have undeniably impacted Delta's revenue growth. Revenue increased by a mere 1% in the third quarter and 7% over the nine-month period, a stark contrast to the double-digit growth figures recorded in previous years.

To address these mounting tax liabilities, Delta is exploring various options, including utilizing its substantial Treasury Bills receivable from the government. However, the company remains concerned about the ambiguities within the country's tax legislation, which significantly increases the risk of future disputes and interpretations.

Delta Corporation, with a market capitalization of US$695.95 million, is Zimbabwe's largest listed company. The potential impact of these tax challenges on the company's operations is substantial and warrants close attention.