The Tax Administration Revenue Management System (TARMS) holds significant potential for enhancing tax administration in Zimbabwe. However, before we blow the trumpet, it is crucial to assess the domestic tax terrain and evaluate its readiness for migration. Master data, internet, infrastructure, etc are critical for its success. To start with the Commissioner of domestic Taxes, through a public notice has requested individual or public officer information comprised of name, identification number, e-mail address and phone number. This data is essential for the new system to send information automatically to complete the registration procedure. This article is about a micro-assessment of the domestic tax terrain in Zimbabwe, examining key factors that may affect the successful adoption of TARMS.
Individual taxpayers and businesses having updated public officer Master Data will be issued a New Taxpayer Identification Number “TIN”, which will replace the Business Partner Number “BPN” on 9 October 2023.Taxpayers who have not obtained their TIN by the 12th of October 2023, must contact ZIMRA or their nearest office for assistance. As per the public notice issued on the 4th of October 2023, areas that should be updated urgently are the public officer’s name, identity number, email address of the public officer and contact details. This can be done by either contacting or visiting any ZIMRA office of convenience. One can posit that, with such developments on the ground it shows a fertile ground has or is being prepared for the new system to spearhead. The following question becomes: “Are both sides ready for the new system”.
It is our view that, for a new digital system to be a success there is a need to severe the digital maturity and development of the country. A country would need to analyse where they are on the digital transformation journey in order to establish the project’s baseline. The tax administration forum has created a “digital maturity” model that splits the transformation process into sections or stages. In this context, a country may establish its position on the digital maturity scale at the start of the project, plot where it wants to be at the conclusion and track progress based on where it maps to at any given time. This schema is only one step in the digital taxation path. The model can be said to include; e- filing, e-accounting; e- matching; e-assess and e-auditing. These can be said to suffice a complete revolution of a tax system and looking at our new tax system it covers partly of what a full system should encompass hence there will be a need to develop for it to be self-sufficient. The amount of money spent or available in comparison to the cost of the plans can be used to gauge progress along the digital transformation route. Budgetary commitment for each phase reflects the government’s commitment to carrying out the transformation program and also serves as the foundation for monitoring progress. Under or sluggish disbursement, for example, is frequently indicative of either procurement concerns or problems with government commitment.
Governments at all levels of development are bound or limited by capacity in tax, technology, and data management, while this constraint is well proven to be especially severe in developing countries, Zimbabwe included. On the government side, limited capacity affects the ability to carry out day-to-day tax administration operations (including audit), and most developing-world tax administrations struggle to keep up with the basics income, VAT, and excise, let alone assessment, audit, debt collection, and taxpayer service. Adding to these responsibilities is the international tax agenda, which includes the BEPS agenda, adopting tax transparency requirements, and now the threat of digital taxes, which strains scarce resources even further hence ZIMRA should be fully prepared to avoid such. The issue of data availability and access is related to both capacity and technology. The ability of a tax administration to use different sources of data as they relate to taxpayers e.g., beyond tax and invoice filing, banking information, customs information, third-party information for profiling and adjudicating arms-length pricing is an important driver of efficiency. Data scarcity is a prevalent concern in Zimbabwe due to compliance issues, administrative issues, and even technology issues the inability to collect, store, and/or secure data is still prevalent hence a need to correct before moving forth.
To migrate to TARMS successfully, a robust tax collection infrastructure is also essential. This includes having a well-established taxpayer database, reliable IT systems, and trained tax personnel. In Zimbabwe, although some progress has been made in these areas, several challenges persist. The taxpayer database lacks comprehensive and accurate information, hindering effective tax collection. Furthermore, the IT systems require significant upgrades to handle the complexities of TARMS.
For a start, the tax administration may begin with a low level of technological use and digital maturity for a variety of reasons (money, capacity, strategic priority, or vision). Alternatively, and related to the mentioned, it is possible that the taxpayer does not or cannot use technological solutions to, for example, e-file returns, invoices, or stream data for a variety of reasons (including, potentially, financial resources, capacity, prioritization, or even a lack of adequate data bandwidth). Thus, even if the tax administration decides to go digital, it is possible that the source of data (the taxpayer) may be unable to participate. As part of the trip, taxpayers would need to be able to engage in the data streaming process. On the other hand, governance and transparency difficulties might be a challenge in all contexts; usually they are one of the most important barriers to compliance. As with the previous challenges, digital transformation is designed to increase transparency and better governance through “seamless” compliance (data streaming in real time). However, for a successful transformation journey, procedures and tax treatment centred on strong governance, compliance, and process transparency must be designed or strengthened.
Meanwhile amid the onboarding of TARMS Matrix Tax School can assist with facilitation of updating of taxpayer’s Master Data, assist with training on the use of TARMS and statement of account reconciliations to ensure correct balances are carried over to the new system in all tax heads.