Zimra imposes US$2m penalty on OK Zimbabwe

Published: 3 hours ago

The Zimbabwe Revenue Authority (Zimra) has imposed a US$2,054,250 civil penalty on OK Zimbabwe Limited, the country's largest supermarket chain, over alleged non-compliance with the Fiscal Data Management System (FDMS), intensifying the retailer's financial challenges.

The FDMS is a tax compliance mechanism that requires retailers to link their point-of-sale systems directly to Zimra's servers, enabling real-time monitoring of transactions. According to OK Zimbabwe's financial results for the year ended 31 March 2025, the penalty was calculated based on 914 tills over a 90-day period starting 23 January 2024.

"The Zimbabwe Revenue Authority issued a civil penalty order against the group amounting to US$2,054,250 in terms of Section 81B as read with the First Schedule of the Value Added Tax Act (Chapter 23:12)," the company said.

OK Zimbabwe is contesting the penalty, arguing that it had been engaging with Zimra on the FDMS rollout but encountered unforeseen technical setbacks, which were communicated to the tax authority. The retailer said it successfully integrated the system in December 2024 and disputed the legality of the fine, citing the absence of a required "show cause" notice and an inflated number of tills in Zimra's calculations. An appeal has been lodged with the Commissioner of Domestic Taxes, with management awaiting a response.

The penalty comes as OK Zimbabwe faces a precarious financial position, with current liabilities of US$44,2 million against current assets of US$25,5 million, leaving just 57 cents in assets for every dollar of short-term debt. In response, the company has embarked on a restructuring plan, which includes raising US$20 million through a rights issue, disposing of assets worth US$10,5 million to reduce debt, and implementing cost-cutting measures such as staff reductions and closure of loss-making outlets, including Borrowdale and Avondale Food Lovers Market stores, all Alowell shops, and a branch in Banket. The company has also restricted capital expenditure to essential maintenance and critical upgrades.

OK Zimbabwe attributes its financial difficulties to poor strategic decisions by previous management, exchange rate volatility, heavy taxation, competition from the informal sector, and unreliable utilities. Despite the challenges, management projects that the company will maintain sufficient liquidity to meet obligations until at least September 2026, provided restructuring initiatives remain on track.

The dispute between OK Zimbabwe and Zimra underscores the ongoing tension between the private sector and tax authorities regarding FDMS compliance, highlighting the challenges of implementing new tax systems while balancing operational realities in the retail sector.
- The Independent

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