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Econet responds tax evasion issue: They paid their agent, but agent didn’t remit

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We’ve just received a statement from Econet Wireless Zimbabwe, responding to the allegations in the media yesterday that they evaded duty taxes since 1998 and are under investigation by the Zimbabwe Revenue Authority ZIMRA. Essentially, Econet is saying the article was false and defamatory. But the companies does go on to explain the details of the matter between them, the ‘whistleblower’ and ZIMRA.

Here are the main points in the statement:

  • Econet paid the agent (Paul Edwards Shipping Company) the duties and taxes but the agent didn’t remit the duty paid.
  • Regarding the importation of non-base station equipment that was cleared as base stations, Econet says base stations are not imported as a single unit but rather separate items from different manufacturers. The base station becomes one unit only after being installed at a site.
  • Econet confirms that there’s a dispute between ZIMRA and themselves over the classification of equipment for import duty and tax purposes.
  • Econet has paid almost 1 billion dollars in various taxes to ZIMRA since dollarisation.

Apart from them confirming that there’s an issue between themselves, ZIMRA and the ‘whistleblower’, Econet doesn’t clarify how exactly the Fingaz article was “false and defamatory”.

Here ‘s the full statement for now. More later:

The Financial Gazette (24/7/2014) carried an article that makes false and defamatory allegations against Econet Wireless concerning the importation of base stations.  The person referred to in the article as the whistle blower was indeed a clearing agent for Econet.  Econet paid him duties and taxes that he failed to transmit to the Zimbabwe Revenue Authority (ZIMRA), but instead converted to his own use.  When we demanded payment of the money, he alleged that he was involved in malpractices in collusion with some Econet employees, and threatened to expose the malpractices if Econet did not pay him.  Because the allegations he made were serious, we immediately reported the matter to ZIMRA and law enforcement agents through meetings our Chief Executive Officer, Mr. Douglas Mboweni, held with the authorities.  We confirmed our report to ZIMRA in writing and invited them to conduct their own investigations while we also instituted our own investigations into the allegations.

Our investigations revealed that since 1998, our base stations were cleared by ZIMRA officials at different ports of entry under a duty free tariff.  The classification of the base station components we imported under a duty free tariff was communicated to Econet in writing, and the classification was followed over a 10 year period from the time when the Department of Customs and Excise fell under a separate Director of Customs and Excise, who is not the current Commissioner General of ZIMRA.

Base stations can never be imported as whole goods, as is the case with vehicles and such other imports.  Base stations comprise components manufactured by different manufacturers in different countries.  A base station is only complete when installed in situ.  A difference has now arisen between ZIMRA and Econet regarding the classification of base station components imported in knocked down form.  Garnishee orders that had been placed on Econet’s bank accounts over this matter for a capital amount of $15,884,943.46 plus a 300% penalty were lifted by an order of the High Court.

Econet has maintained the position that ZIMRA is bound by the practice it followed for over 10 years, and that this position is correct and cannot be altered retrospectively.  The dispute is before two courts of competent jurisdiction, the High Court and the Fiscal Appeal Court.  Consequently, we are limited on what we can say about the matter.  However, our lawyers are confident about our prospects of success.

The garnishee orders that were placed on our accounts last year were lifted by the High Court.  The allegations made against Econet or ZIMRA officials by the so-called whistle blower are false and have no substance.  The allegations are extortionate and calculated to demonise Econet and cause friction between Econet and officials of ZIMRA, who will now be scared of treating Econet properly as a major client for fear of being accused of colluding with Econet.  Econet has instituted proceedings for the recovery of its money from the so-called whistle blower.  For the record, we wish to state that Econet is a good corporate citizen that does not avoid its tax obligations.  Since dollarisation, Econet has paid the following Income Tax, Value Added Tax, Import Duties and License Fees respectively, a fact that contradicts the false allegations published against it:

Econet Financial Year Ending 28 February2010        US$2011          US$2012          US$2013         US$2014       US$YTD 2015US$Total US$
Net Value Added Taxation paid45,969,983 54,407,502 62,653,169 72,463,609 56,682,157 18,588,190310,764,610
Corporate Taxation20,240,579 59,527,811 30,722,858 44,913,417 43,129,358 19,422,678217,956,701
Telecommunications regulatory fees and levies19,243,440 30,287,073 31,377,191 38,625,397 28,872,570 8,590,352156,996,021
Licence renewal fee-   -   -   -   137,500,000 -  137,500,000
Employee taxes5,734,874 9,089,742 10,185,302 12,470,601 15,129,296 4,904,34457,514,159
Customs duty and other taxes 2,431,634 11,884,752 16,586,410 19,322,173 23,793,000 6,862,69180,880,660
Total taxes, fees and levies paid to Government and Statutory bodies93,620,510 165,196,880 151,524,930 187,795,197 305,106,380 58,368,255961,612,152

Econet has been recognised by the collector of taxes for its contribution to fiscal revenues and for its compliance record.


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5 thoughts on “Econet responds tax evasion issue: They paid their agent, but agent didn’t remit

  1. Econet did not pay duty on site equipment that is not classified under telecoms equipment, i.e., batteries, battery cabinets and power cables..All of these were declared as telecoms equipment.

  2. I think its a strategy to source money for civil servants… but the strategy wont work. Kutsvaga nedemo ne sauti uku. Masiiwa has seen worse than this…

  3. What is Econet paying for its incoming international traffic? On the market their rates are as high as 0.40 US cents. Are they declaring to POTRAZ and ZIMRA this amount?

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