eBusiness Weekly
Africa Moyo
Businesses charging goods and services in foreign currency should start paying taxes, particularly value added tax (VAT) in hard currency, according to Zimbabwe Revenue Authority (Zimra) Commissioner General Faith Mazani.
Mazani revealed this yesterday during a Professional Women, Women Executives and Business Women’s Forum (Proweb) breakfast meeting in Harare.
She said Zimra has already opened a foreign currency account (FCA) as it gears up to start receiving taxes in hard currency.
The Reserve Bank of Zimbabwe (RBZ) is soon expected to announce that Zimra is now free to start collecting tax in foreign currency.
The move comes as a number of businesses have started charging products in US dollars, especially after the pricing madness that gripped the country from early October after Government announced new measures such as allowing exporters and individuals earning foreign currency to open FCAs.
FCAs are designed to reduce the burden of foreign currency shortages on exporters.
Mazani said the decision to start charging in US dollars is now at an advanced stage after Zimra convinced the Ministry of Finance and Economic Development and the RBZ of its importance.
“And yes, we have been authorised to open an FCA account. What is (now) required is the order that the Reserve Bank has to give for us to then make it public information that we pay our taxes in the currency that we collect in.
“That is the official position but for tax purposes, as Zimra we could not go out and start announcing before that order is given. But we are expecting that order anytime this week and we will be communicating. We do have the FCA account (now),” said Mazani.
She said Zimra has been engaging monetary authorities for some time now, to be cleared to start collecting tax, mainly VAT, in foreign currency.
“It’s something that we have been fighting with the Ministry (of Finance), especially for VAT, where it’s an agency collection where ‘if you are collecting our money in dollars, give us (tax) in dollars. So we just need to be officially allowed but we are on track,” said Mazani.
Most traders demand U S dollars
Since the announcement by RBZ Governor Dr John Mangudya while presenting the Mid-Term Monetary Policy Statement on October 1 that exporters were free to open FCAs, several businesses mainly pharmacies, the fabrication and steel sector, clothing shops and private hospitals, are now charging in US dollars.
Giant clothing retailers such as Edgars Stores Limited are accepting all forms of payment including foreign currency, bond notes and electronic money. However, if a customer was using electronic payments or bond notes, the prices are sky high while the US dollar prices are rated on the prevailing parallel market rate. For instance, if the parallel market rate for foreign currency was 300 percent, Edgars charges US$30 and $100 bond notes or electronic money. Private doctors and clinics such as Baines Clinic in Harare, are also accepting all forms of payments although a foreign currency component is always there for whatever attention a patient gets.
The foreign currency transactions have prompted consumers to raise the red flag, demanding that all businesses charging in foreign currency should pay taxes and salaries in hard currency. Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe, told Business Weekly yesterday that charging VAT in foreign currency for those selling in that currency would be “fair”.
“I think for local sales, if one is charging products in foreign currency, it is only fair to pay VAT in forex. What I am not sure of is how they will do it because all prices, even those that are in RTGS, are denominated in US dollars,” said Jabangwe.
It is not clear how Zimra would know the identities of companies charging in foreign currency given that some of the biggest culprits are not registered for tax purposes and do not have fiscal devices. Further, some traders such as Booties Pharmacy, have stopped issuing fiscal receipts and are manually generating them, a move that will see them evading VAT in forex.
Deputy Chief Secretary for Presidential Communications George Charamba was quoted in the media this week saying it was unfair for some companies to retain 70 percent of their foreign currency when they export but still want to access local raw materials in bond notes or RTGS.
“You can’t ask to pay in bond notes when you are beneficiating for a foreign market. Where is your foreign currency going? It is this 70 percent that’s finding its way to the black market. This business of buying in bond notes and selling in US dollars won’t fly,” said Charamba.
