Title: Impact of value added tax refunds on revenue collection - a case of Region 1 taxpayers, Zimbabwe

Authors: Tapiwa Dalu; Ruvimbo Gillian Dalu; Tatenda Archibald Matibiri; Langton Madzamba

Addresses: Business Research Unit, Dennis and Duncan Technologies, 13 Eastcot Avenue, Paddonhurst, Bulawayo, Zimbabwe ' Business Research Unit, Dennis and Duncan Technologies, 13 Eastcot Avenue, Paddonhurst, Bulawayo, Zimbabwe ' Business Research Unit, Dennis and Duncan Technologies, 13 Eastcot Avenue, Paddonhurst, Bulawayo, Zimbabwe ' Business Research Unit, Dennis and Duncan Technologies, 13 Eastcot Avenue, Paddonhurst, Bulawayo, Zimbabwe

Abstract: The value added tax (VAT) refund claim process the 'Achilles heel' of VAT system. This paper seeks to examine the VAT refund approach of ZIMRA and tries to gauge the effectiveness of the approach and suggest a typical model of best practice that takes into consideration compliance issues faced mainly in developing and transitional countries during different stages of development of the VAT system. By administering an interview questionnaire to 150 respondents and obtaining data from various ZIMRA reports and statements and VAT legislation, the study finds out that most of the taxpayers or investors importing large items of capital equipment complained that the levying of VAT on their imports has a negative effect on their cash flow, lack of categorisation of clients into various classes for VAT refund process delayed refunds and the fact that the VAT registration threshold is way too low and thus tends to lead to registration of defaulters or fraudsters. The study therefore recommends more focus to be put on limiting pre-refund audits to high-risk cases, paying interest on refunds processed late and proper administration of statutes and education of clients on their rights and obligations with regards to the VAT system.

Keywords: taxpayers; value added tax; VAT refunds; Zimbabwe Revenue Authority; ZIMRA; revenue collection; refund claims; capital equipment; VAT refund delays; VAT registration threshold.

DOI: 10.1504/IJEBR.2016.076176

International Journal of Economics and Business Research, 2016 Vol.11 No.3, pp.247 - 273

Received: 30 Oct 2015
Accepted: 06 Jan 2016

Published online: 25 Apr 2016 *

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