BLUE-CHIP Delta Corporation Limited (Delta) is projected to pay a staggering US$200 million in taxes by March 2025, according to estimates from local asset manager Imara Asset Management (Imara).
Analysts have cautioned that this hefty tax obligation could significantly strain Delta’s financial resources and affect its competitiveness in the regional market.
In its third-quarter trading update for the period ended December 31, 2024, released yesterday, Delta confirmed the burden. The company stated that pricing its products with the sugar tax in mind resulted in a 1% increase in group revenue for the quarter, compared to a 19% rise reported in the prior period.
For the nine month period to December, revenue grew 7% compared to a growth of 12% in the prior year.
Delta has incurred substantial costs from the sugar tax, paying US$31,2 million for the period February to December 2024, covering both sparkling beverages and cordials.
The introduction of the sugar tax in January 2024 initially set the levy at US$0,002 per gramme of sugar contained in beverages but was later adjusted to US$0,001.
However, following protests from manufacturers, Treasury stated that ready-to-drink beverages would keep the US$0,001 sugar tax while cordials would attract a US$0,0005 charge per gramme of sugar.
During a Zoom meeting held as part of the week-long annual World Economic Forum in Switzerland, which concludes today, Finance, Economic Development and Investment Promotion minister Mthuli Ncube revealed that the sugar tax had generated US$31 million for the Treasury.
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“That is a huge number, especially when one considers that Delta for their financial year ending March 2025 will likely pay in excess of US$200 million to the tax man or government in all taxes, including excise, VAT (value-added tax, income tax), sugar tax and so on! This compares with their annual revenue of around US$750 million,” Imara said in its Zimbabwe Investment Notes for January 2025.
Compounding these challenges, the taxman is claiming an additional US$73 million from Delta in taxes, interest, and penalties related to a tax dispute.
“The company is contesting the tax assessments issued by the Zimbabwe Revenue Authority (Zimra) for amounts that they consider to have been payable exclusively in foreign currency. Additional assessments were received in November 2024 adding to those assessed in 2022, to bring the disputed amount to US$73 million, which covers principal tax, penalties and interest for value added tax and income tax for periods 2019 to 2022,” Delta said in its trading update.
“The assessments do not consider the local currency payments made at the relevant time, which have since been debased through inflation and currency depreciation. Adverse judgements have been made by both the High Court and the Supreme Court, although there are appeals and new cases at various stages in the courts including the Constitutional Court and the Zimra appeals processes.”
The group said it had paid a total of US$9,2 million as at December 31, 2024 in line with the “pay now, argue later” principle and pre-existing payment plans.
“We believe any revisions to the payment plan will be rational, with due consideration of the financial health of the business and the fact that the principal amounts were fully paid in legal tender at the relevant periods, based on the best available interpretation of the legislation,” Delta said.
Imara criticised the government’s aggressive approach to tax collection, suggesting it could deter investment in Zimbabwe.
“This example highlights what impact government is having on Delta, one of Zimbabwe’s largest businesses,” it said.
The high tax burden is not unique to Delta. Econet Wireless Zimbabwe, the country’s largest telecommunications company, is also facing significant tax obligations.
In its 2024 annual report, Econet disclosed that it paid taxes amounting to 26% of its topline revenue through excise duties, levies, corporate taxes, customs duty, withholding taxes, and monthly licence fees.
