The court criticised Zimra for levying the penalties amid complaints that businesses were baulking under statutory payments obligations.
It said Zimra had no power to impose a fine where a contravention of the Customs and Excise Act had not been admitted.
“The respondents are hereby ordered to refund to the applicant all fines that were imposed and collected from it. Each party is to bear its own costs,” Justice Esther Muremba ruled.
The ruling is massive setback for Zimra, which has been accused by businesses of using statutes to put pressure on companies. A subsidiary of Tongaat Huletts, the Zimbabwe Sugar Sales, is also battling charges of tax evasion. Zimra has accused the group of $45m worth of tax liabilities.
Industry players, however, say the group was merely an agent for Hippo Valley and Triangle - the sugar producing units run by Tongaat Hulett.
Last week, Zimplats flagged that it had taken a knock from heavy taxes after its after-tax profit for its 2018 full year period declined from about $45m to $3m.
Then it suffered a once-off tax expense of $163.3m, which lowered profitability for the period. Chief financial officer Stewart Mangoma said tax expenses for the period also increased from $55.8m to $163m, propelled by an additional $98m deferred tax charge.
Zimplats is the biggest mining house in Zimbabwe. Its accounts were garnished over the erroneous levying of customs taxes and penalties between 2009 and 2013. Zimra argued that Zimplats was not entitled to rebates during the period.
The country’s executives say taxes are stifling operations at a time that the government is starved of revenue. They have warned that excessive taxation and high penalties will choke businesses and limit tax payments.
“The penalties and the tax rates are stifling,” said a manager with an agro-processing company.
The Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) says Zimbabwe’s tax regime is a costly disadvantage to local businesses.
Zeparu say medium-sized businesses must pay as much as 35.3percent of their profits into statutory taxes - higher than South Africa, Zambia and Botswana.
– BUSINESS REPORT