The “Pay Now, Argue Later” Principle: Afdis, ZIMRA and the Wider Delta Tax Dispute
Introduction
The long-running tax dispute between the Zimbabwe Revenue Authority (ZIMRA) and companies within the Delta Group has become one of the most significant tax controversies in Zimbabwe. The dispute centres on the currency in which certain taxes should have been paid during the 2019-2022 period and the treatment of taxes previously settled in local currency.
African Distillers Limited (Afdis), a subsidiary of Delta Corporation, has now disclosed in its audited financial statements that it has paid approximately US$1.82 million to ZIMRA under Zimbabwe’s “pay now, argue later” tax regime while continuing to challenge aspects of the assessments.
The case provides a useful illustration of the operation of Zimbabwe’s statutory tax recovery framework and the accounting treatment of disputed tax liabilities under IFRS.
The Legal Foundation of the “Pay Now, Argue Later” Rule
The legal basis for the principle is found primarily in section 69(1) of the Income Tax Act [Chapter 23:06], which provides that the obligation to pay tax is not suspended merely because a taxpayer has lodged an objection or appeal, unless the Commissioner grants otherwise.
The Act further provides that:
- Any excess tax paid must be refunded if the taxpayer ultimately succeeds.
- Any outstanding amount remains recoverable by the Commissioner.
- A taxpayer cannot challenge the correctness of an assessment during tax recovery proceedings.
In practical terms, this means:
- ZIMRA raises an assessment.
- The taxpayer may object or appeal.
- Despite the objection, ZIMRA may continue collecting the assessed tax.
- The legal dispute proceeds separately.
- Adjustments or refunds are made after the final determination.
The rule exists to protect government revenue and prevent lengthy litigation from delaying tax collection.
Afdis’ Disclosure in the 2026 Annual Report
Afdis disclosed an uncertain tax position in Note 7.3 of its audited financial statements. The company stated that there were disagreements with ZIMRA regarding:
“the currency of payment for certain taxes and the methods of splitting the taxes by currency for the period 2019 to 2022.”
According to the note:
- ZIMRA issued income tax assessments, penalties and interest amounting to US$1,841,221
- ZIMRA’s position is that the taxes should have been paid entirely in foreign currency.
- The company acknowledged that the court judgment in the Delta v ZIMRA litigation generally supported ZIMRA’s position, although legal and factual issues remain unresolved.
- As at 31 March 2026, Afdis had made accumulated payments of US$1,820,221 under the “pay now, argue later” principle and agreed payment plans.
Importantly, Afdis continued to maintain that aspects of the assessments required clarification and adjustment and was still pursuing appeals.
Auditor Emphasis of Matter
The seriousness of the dispute is reflected in the auditor’s report.
Ernst & Young specifically drew attention to Note 7.3 and highlighted:
“the uncertainty relating to the future outcome of an ongoing tax dispute between the Company and the Zimbabwe Revenue Authority.”
Although the auditors did not modify their opinion, the inclusion of an Emphasis of Matter indicates that the issue is significant enough to warrant special attention by users of the financial statements.
How Did Afdis Account for the Payments?
The accounting treatment is particularly interesting.
1. Current Tax Asset Recognition
Afdis recorded a Current Tax Asset of US$1,820,221 on its Statement of Financial Position.
The balance increased from US$1,130,221 in the prior year to US$1,820,221 in 2026.
This amount exactly matches the cumulative payments disclosed under Note 7.3.1.
Why was it recognized as an asset?
Because management has not accepted that the assessment is final and believes the matter remains under challenge. The payments made to ZIMRA have therefore been recognised as recoverable pending resolution.
Economically, Afdis is treating the amount as:
- tax paid under protest;
- potentially refundable; and
- therefore an asset rather than an expense.
Did Afdis Disclose a Contingent Liability?
Yes.
Afdis explicitly disclosed a contingent tax liability relating to interest and penalties.
The financial statements state:
“No provision for any interest and penalty liability… has been made.”
Management’s legal advisers concluded that an outflow is:
“possible, but not probable.”
The disclosed contingent liability amounted to:US$588,247.
Under IAS 37, a liability that is possible but not probable is disclosed as a contingent liability rather than recognised as a provision.
Therefore:
| Item | Treatment |
|---|---|
| Tax payments to ZIMRA (US$1.820m) | Recognised asset |
| Interest and penalties (US$588k) | Contingent liability disclosed |
| Tax assessment itself | Under dispute and unresolved |
This treatment is consistent with IAS 37 and IFRIC guidance on uncertain tax positions.
Did Afdis Disclose a Contingent Asset?
No.
The financial statements do not disclose a contingent asset.
Instead, Afdis has already recognised a current tax asset of US$1.820 million on the Statement of Financial Position. A contingent asset would only arise where recovery is uncertain and cannot yet be recognised.
Afdis went beyond disclosure and recorded the amount directly as an asset.
Consequently:
- Recognised Asset: Yes (US$1.820 million current tax asset).
- Contingent Asset: No explicit disclosure.
- Contingent Liability: Yes (US$588,247 interest and penalties).
Relationship to the Wider Delta Dispute
The Afdis disclosure expressly references the court judgment in the Delta vs ZIMRA matter, indicating that the same core issues regarding foreign-currency tax obligations and historical tax payments affect entities across the Delta Group.
The tax note confirms that Afdis considers the Delta judgment supportive of ZIMRA in some respects, yet believes significant factual and legal questions remain unresolved.
This suggests that Afdis’s US$1.84 million assessment forms part of a broader tax controversy affecting Delta Group companies.
Financial Statement Impact
The size of the disputed balance should be viewed in context.
For FY2026 Afdis reported:
- Revenue: US$93.23 million
- Profit after tax: US$7.67 million
- Total assets: US$36.80 million
- Current tax asset: US$1.82 million
The disputed amount therefore represents approximately:
- 23.7% of annual profit after tax, and
- 4.9% of total assets.
Based on these ratios, the auditors’ decision to highlight the matter through an Emphasis of Matter is understandable.]
Conclusion
Afdis provides a textbook example of Zimbabwe’s“pay now, argue later” tax regime. Under section 69 of the Income Tax Act, ZIMRA is entitled to collect assessed taxes even while disputes are ongoing.
The company’s 2026 financial statements show that:
- ZIMRA assessed approximately US$1.84 million.
- Afdis paid US$1.82 million under the pay-now-argue-later framework.
- Those payments were recognised as a Current Tax Asset, not an expense.
- Afdis disclosed a contingent liability of US$588,247 relating to possible interest and penalties.
- Afdis did not disclose a contingent asset, because the disputed payments were already recognised as an asset on the balance sheet.
From both a tax law and IFRS reporting perspective, the disclosure demonstrates how a taxpayer may be compelled to pay first while preserving its legal right to continue challenging ZIMRA’s assessment.
