Econet Wireless, Zimbabwe’s largest mobile network operator (MNO) has come under some scrutiny regarding a tax evasion and externalisation scandal which alleges that the MNO deprived the country of up to US$300 million.
The issue, which first drew attention in 2014 recently resurfaced after media reports, citing an audit report prepared in 2016, highlighted how Econet and some executives from the local revenue authority, ZIMRA, had connived to externalise cash and evade the MNO’s tax obligations.
It’s alleged that this was achieved through the importation of goods who’s tax wasn’t declared and through a transfer pricing scheme that involved the overstatement of prices on equipment bought from Econet Capital – its sister company based in Mauritius.
Techzim sought clarification from Econet regarding this issue and the content of the audit report. The operator has dismissed the allegations and it sent through the following responses:
ZIMRA’s chairperson is quoted as having said that the revenue authority has started taking actions aginst Econet. Other than the US$67 million garnish order has there been any other action taken by ZIMRA regarding this matter?
We are not aware of any other action. As you already know, the garnishee order was set aside by an order of the High Court with which ZIMRA consented. The penalty of $47 million that was included in the amount was set aside by the High Court while the capital amount of $15 million is the subject of an appeal that is pending before the Fiscal Appeal Court. Other operators imported base stations in exactly the same manner as we did. No issues have been raised with them. This selective misapplication of the law is being challenged through the Courts.
There have been allegations that Econet overstates prices on imports from its Mauritius company. What is Econet’s stance on this issue?
This is false. The Mauritius procurement arm of the group extended three years credit to the Zimbabwe Company. It accepted payment partly in shares and partly cash. The price to the Zimbabwe Company included finance charges covering the three year period which were equivalent to 18% per annum of the cost of the equipment. The finance charges were quite low compared to the rate of between 24.7% to 44.7% per annum (as per the Monetary Policy Statement issued on 28 July 2010) at which the company would have borrowed locally at the time. It should be mentioned that there was no capacity among local banks to extend credit to the company of that magnitude and for that tenor at the time.
Are any of the contents of the audit report that’s cited available to the public? If so may you please share them?
We have not had sight of this audit report. All we know about it is what has been reported by the Herald, and the questions we have been asked by the authorities that we have answered satisfactorily.
7 comments
You cannot help little men by tearing down big men.
Raising money for the birthday is now proving to be difficult given the conditions our gvt have put itself into! Im sure donation request is already on its way to Econet HQ soon after this story.
If this the case is before courts, why bother writing about it now? Jonathan Moyo’s cases are before courts, why not publish it. Our gvt(or should we say individuals within gvt) act with vengeance to anyone who they think have done them wrong.
Then it is the same government going around looking for investments. Who in his right mind can invest in our country when you know and the gvt make it also known that they can take away all your investments the moment someone within gvt dislike you
Mbavha iMbavha and if they are stealing they should be held accountable, if you read the story the issue has resurfaced because of the audit report made public, as a company i think Econet has overplayed the “we are being persecuted” card a bit too much so they get away with things like hiking data prices and evading tax..
If i may ask is it the government which audited the import of base stations or it was a private auditor and the govt simply acted upon the results of the audit. I know this issue came about years back at the instigation of one clearing agent who blew the whistle at Econet. I am sure some here would be singing a different tune if the same allegations were made against a state owned entity. The screams which we hear on this platform should instead be directed towards the auditors of the matter as well as the whistleblower .I also find it puzzling that Econet can claim its competitors imported base stations the same way it did. How do they know the internal procurement issues of other operators? As usual Econet cannot address its own issues without mentioning other people.
Econet have the right to claim that they were buying the base stations the same way everyone was doing because that what their agent was doing. How he then got the paper work and actually get things done at the broder in not Econet’s concern.
If you are employing a agent to clear goods for you, why would you want to be at the border following what he is doing or how he have done it?
This guy is trying to cover up his corruption tracks by nailing Econet and our gvt is falling for it because it always have a bone to chew with Econet.
A man is accused of cheating on his wife. The signs and signals are everywhere, but no one can prove it, because he is good at covering his tracks.
this issue came up before and behold econet proved that in that I stance the. leading agent was paid fully but choose to pull wizardry with zimra payment’s. no econet is not a saint and is guilty of quite a few things but let’s give them the benefit of the doubt at this moment.