The Zimbabwe Finance Act No 1 of 2018, promulgated on 14 March 2018, brought into force

the Tax Amnesty legislation. According to the Act, a tax amnesty will be granted on outstanding
taxes which accrued prior to 1 December 2017. The Tax Amnesty provides an opportunity for
certain taxpayers to apply for immunity against penalties and interest in respect of any unpaid
tax, or tax irregularities in respect of the Covered Taxes.

A tax amnesty is a temporary scheme undertaken by the government in order to increase their tax
revenues. As per this scheme, the government encourages its citizens who have evaded tax in the
past to come clean and pay forward their dues. Tax amnesty is an option chosen by many
governments to increase the tax base and tax revenues (Alm et al., 2018). This fiscal policy
provides a set period during which taxpayers can pay a fixed amount of taxes in exchange for
forgiveness of their tax liability without fear of legal prosecution (Alm et al., 2018).

The income covered under the Tax Amnesty (Covered Taxes) The Tax Amnesty relates to
unpaid taxes or duties already known by the Zimbabwe Revenue Authority (ZIMRA) and
recorded in its system, or not declared to ZIMRA but should have been paid by 01 December
2017, or paid from income sourced or deemed to be sourced in Zimbabwe. It will cover all taxes
administered by ZIMRA namely: Income tax (Corporate taxes & Employment Taxes);
Withholding Taxes; Customs and Excise; Value Added Tax; Capital Gains Tax; Stamp duty, and
Presumptive tax.

The Tax Amnesty will result in the taxpayer making the appropriate disclosure, being absolved
from penalties, interest and prosecution upon the successful application in the form prescribed by
the Minister. The principal tax amount remains due and payable on or before the end of the Tax
Amnesty period.

A Tax Amnesty application will only be considered if it is lodged with ZIMRA by 30 June 2018.
The application shall be in writing on a completed application form TA01 (attached). The Tax
Amnesty will only be granted upon the applicant having made a full disclosure in conformity
with conditions that may be prescribed and upon having provided the required supporting
documentation. A payment plan should be proposed at the time of submission of an application.
Payments must be made towards the principal while applications are being submitted and
processed before an approval has been granted by ZIMRA. The approval process is at the
discretion of the Commissioner, or of persons to whom the power to approve is delegated to by
the Commissioner. The Commissioner will provide a response to the application within 10 days
from receiving a Tax Amnesty application.

There are Significant reasons of tax amnesty which are economic, financial, political, technical
and administrative reasons.

Economic-Financial Reasons

The most important reason for the tax amnesty is that financial difficulty of taxpayers and public
revenues during the crisis period (Bornman & Stack,2015). Tax amnesties are considered
necessary in order to finance increased public expenditures, and collect at least some of the tax
claims, and in addition, relieve the taxpayers which are in difficult situation (Bornman & Stack,
2015). Due to the economic crises, companies and taxpayers are unable to pay tax debts and the
problem creates the need for tax amnesty. For this reason, governments occasionally apply
amnesty arrangements to revive the market.

Political Reasons

The political interest motive of the governments is one of the reasons for use of the amnesty
mechanism (Sanchez & Miguel,2017). In the next election period, governments can demand new
votes and applied this mechanism. Besides, tax laws can be enforced by the desires of interests
and pressure groups. Determination of the extent of the amnesty is entirely political decision the
decision is in the government’s power (Alm, 2018). Tax amnesty has occupied the public in
almost every period and it has become one of the indispensable propaganda elements of political
parties in election periods (Agbonika, 2015).

Technical and Administrative Reasons

Liquidation of past periods may be necessary in order to resolve the existing confusions,
defective points of the system and make the radical change on the available tax system
(Agbonika, 2015). Because of the fact that tax administration and tax courts have heavy job
workload and collecting of taxes and debt follow-up takes a long time, governments can apply
tax amnesty. From the administrative point of view, tax amnesties are beneficial in terms of the
collecting of tax debts which are increasingly difficult to accumulate and reducing of the
accumulated workload of administration.
Positive Opinions and Advantages of tax amnesty

Supporters of tax amnesty advocate the arrangements on account of several reasons. These
reasons are necessity of the amnesty after the political-economic depressions, complex tax
legislation and interpretation disagreements, the approach tax offences are less dangerous than
other crimes, lessening the burden of tax administration and tax courts, source of income which
is fast, and the approach that taxpayers voluntarily follow the rules after an amnesty arrangement
(Wadesango et al. 2017). It can be claimed that these reasons are related short run benefits and it
may cause detrimental problems in the long run.

Nar (2015) discovered that amnesties increase future compliance by lowering its cost as it will
no longer be necessary to evade past tax. Kwatemba (2016) state that amnesties yield an
immediate revenue inflow at low collection cost. Berksoy & Kircicek (2018) depict tax
amnesties as revenue raising tools in both the short and long run as they bring former non-
compliers into the tax system. Also, known taxpayers may report other additional sources of
income that would have been difficult to detect.

This method is being implemented by both developed and developing countries. However, being
applied the method continuously may cause significant problems. Some of them have been listed
below.

Encourages Tax Evasion:

Tax amnesty schemes encourage tax evasion. Wadesango & Wadesango (2016) argue that tax
amnesties produce little short-run revenue and weaken incentives for tax compliance in the long
run. Taxpayers become more than comfortable evading taxes when they are due. This is because
they are aware that later they will get a chance to pay taxes on their ill-gotten wealth. Alm et al
(2017) emphasize that an amnesty leads to expectations for a future tax amnesty and this
negatively affects tax compliance levels. In addition, Nar (2015) argues that an amnesty angers
loyal taxpayer which may lead to a reduction in their compliance level as they feel cheated by a
program that seems to only reward non-compliance. Recurrent tax amnesty schemes are one of
the reasons that countries like India and Pakistan have a very low rate of tax compliance.

Encourage Illegal Activities:

Some tax amnesty schemes offer legal immunity as well (Sanchez & Miguel ,2017). Hence,
people are encouraged to become gangsters, accumulate huge sums of money, and then turn over
a new leaf, and live a normal life. This increases the crime rate in general, which negatively
affects the economy of any country. Accordingly, the relief of unfaithful individuals through tax
amnesty will reduce the justice of the tax system. Junpath et al. (2016) support this idea as they
point out that a repeated amnesty is not viable in reducing non-compliance levels because it
discourages compliance as honest taxpayers view amnesties as unfair policies which only protect
and benefit the interest of non-compliant taxpayers. Secondly, Tax offences are those who
formulate a plan and desire to damage public finance (Sanchez & Miguel, 2017).

Weakens Tax Administration:

tax amnesty may decrease the compliance of tax legislation. According to the last negative
opinion, tax amnesties cannot decrease the workload of tax administration and tax courts because
the files will close with the amnesty, but these files give place to other files which will be
collected taxes with the amnesty. Hence, instead of punishing the tax officers for poor
performance, the government simply ignores them. As a result, over time, tax officers become
complacent, and this ends up weakening the entire tax administration (Wadesango et al. 2016)
The real reason why tax evaders are able to evade taxes is that the government’s revenue officers
are not doing their job properly.

Encourages inequality

In line with that, Torgler (2015) argues that an amnesty violates the principles of equity and this
could result in defaulters remaining non-compliant anticipating for future additional amnesties.
Furthermore, compliant taxpayers may start to dodge on their tax affairs as a result of amnesties
and this results in deterioration in the levels of tax compliance. Nar (2015) further argues that an
amnesty lowers compliance levels as the fear of being sanctioned is reduced amongst taxpayers
since it can be amnestied in the future.

leads to foregone or lost revenue in the form of penalties and interest

Shelvin et al. (2017) reiterate that another shortcoming of an amnesty is that it leads to foregone
or lost revenue in the form of penalties and interest. Therefore, these parallel lines of thought led
to the carrying out of this research on the impact of tax amnesties towards improving tax
compliance and maximizing revenue collection in Zimbabwe. Furthermore, the research focused
on the SMEs’ level of tax compliance and revenue collection after being granted amnesties as
ZIMRA had been encountering low levels of tax compliance and revenue collection from the
SMEs sector.

The Zimbabwean central and local authorities were not very successful with the tax amnesty
because in light of substantial amounts owed to the Revenue Authority exceeding $1 billion and
to improve taxpayer database, the Zimbabwe Government introduced its first tax amnesty under
the Finance Act, 2 (2014). This was also aimed at cultivating a culture of voluntary tax
compliance. According to Majaka (2016) the then ZIMRA Commissioner General said that the
first amnesty was a disappointment as only a few applicants had registered for the amnesty
program by the end of February and this led to the payment deadline being pushed further to the
31st of December 2015. Also, in Kapeza’s (2015), Mandishona alluded that most businesses
especially small to medium enterprises do not trust ZIMRA and they think that the tax amnesty
program is a ploy to net and trap them hence the low uptake of the facility. Thus, the first
amnesty was a failure towards maximizing revenue collection and improving the SMEs’ tax
compliance as evidenced by the low uptake of the program.

The Zimbabwean Government made further provisions by enacting another tax amnesty in
accordance with the Finance Act, 1 (2018) to meet the shortcomings of the first amnesty.
However, the second amnesty was of no significance than the first as a poor turnout was again
recorded that is, a 0.14% responded from those owing the authority (ZIMRA Small and Medium
Clients Office). According to Wadesango et al. (2017) the revenue authority recorded a lower
turnout in respect to the expected outcome on applications and payments. Thus, the tax amnesties
yielded a low outcome in respect to applications and payments as supported by (Nar, 2015).
Despite the granting of the tax amnesty, low outcome was experienced from SMEs denoting low
levels of compliance and revenue collection.

In conclusion tax amnesties are a necessary evil, which have a number of costs as well as some
benefits, provide tremendous facilities for taxpayers who do not fulfill their obligations on time
and properly. The amnesties are an additional source of income for the public in short-term. In
addition to these incomes, an increase in the tax revenues in the short term will lead to a decline
and in the long term and erosion will occur in the tax consciousness and morality due to a
decrease in voluntary tax compliance with the new amnesty expectations. It can be argued that
tax amnesty damages the tax auditing authority and function of conciliation institution. In brief,
tax amnesties can be beneficial if these are based on serious investigations and realize in the
direction of specific and conscious purposes. Rather than short-term expectations, political will
should attach importance to long-reaching arrangements and also protect honest taxpayers.
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