ZANZIBAR Revenue Authority (ZRA) has conducted an in-depth investigation into recent changes in the issuance of liquor import licences in Zanzibar and the found the changes to be ineffective.

The special investigation report by a ZRA team revealed substantial tax losses between January and June this year, attributing them to various issues, including corruption and tax evasion.

The ZRA’s findings indicate that nearly all licensed alcohol importers lack an adequate system for managing their business records.

“There is no effective stock control system to monitor inventory trends against import documents, and there is also no compliance with electronic receipt issuance (VFMS),” the report stated.

The ZRA discovered that one licensed importer, KIFARU, does not have the financial capability to operate an alcohol business in Zanzibar and instead uses its licence to hire another trader from Dar es Salaam to handle operations on its behalf.

Additionally, this company has not paid VAT refunds for any months since it began operations up to June 2024, due to purchases exceeding sales. The report also highlights dissatisfaction with the entire process of importing alcohol at Zanzibar port.

Many importers are removing their goods from the port at night, with a high likelihood of misdeclaring goods as coming from outside the country.

“One company named 101 Investment uses the Forodhani area to distribute their goods where no customs officer checks the incoming goods,” the ZRA report notes.

The investigation further found that some large bars and restaurants act as alcohol distributors contrary to their business licences, and their sales do not provide appropriate receipts since purchases were not recorded with VFMS receipts.

Moreover, there is a high probability of deliberate tax evasion by these newly licensed importers, with their tax payments being below ten percent (10 percent). 

Many bars and nightclubs are reported to accept smuggled alcohol, as it is not VAT-registered and therefore does not require VFMS receipts, which they cannot use for VAT input.

No smuggled alcohol seizures from KMKM have been reported to the Zanzibar Revenue Authority in the first six months of 2024. Instead, there are numerous reports of smuggling other food products, such as cooking oil, rice, and sugar. 

The ZRA report also found that there is no stable supply of alcohol to tourist hotels due to the lack of electronic receipts (VFMS) and some traders being unable to provide adequate stock.

“There is poor control at Malindi Port where ships from Dar es Salaam anchor. Our brief investigation revealed that only one Customs Officer supervises inspections early in the morning when ships arrive,” the report added.

Additionally, the investigation discovered that some imported beers and other containers are likely being smuggled into the country through trucks carrying food products from Dar es Salaam, making it difficult to inspect the trucks due to the port’s infrastructure limitations, including the lack of scanning equipment for incoming goods.

Zanzibar Liquor Control Board (ZLCB), the advisory body for liquor regulation in Zanzibar established under the Liquor Act No. 9 of 2020, made changes to the licensing process last year.

Despite opposition to the changes, the Board communicated with various institutions, including the Zanzibar Revenue Authority (ZRA), at the beginning of this year regarding the modifications in the issuance process.