News / Local
Govt losing millions as firms evade US dollar tax
06 Nov 2020 at 01:47hrs | Views
THE Zimbabwe government is being cheated of millions of United States dollars in tax revenue by businesses that are accepting foreign currency payments but not declaring or under-declaring the forex purchases for tax purposes.
This comes after government in July allowed the use of foreign currencies under SI185 of 2020, which requires dual pricing, quoting and offering of prices for goods and services. Compliance is also in accordance with the VAT Act Section 38 (4) and Finance Act Section 4.
Zimbabwe Revenue Authority (Zimra) has introduced hefty fines and penalties including assuming all revenues collected by offenders are in foreign currency to encourage compliance.
An investigation by the Zimbabwe Independent shows several companies are receipting United States dollar cash payments as local Zimbabwean dollar purchases.
In some cases, this is being done to deliberately evade remitting taxes in forex for all purchases done in that currency, in particular the greenback, while for others it is because they are yet or in the process of installing the systems to electronically receipt foreign currency purchases.
Some business operators are enticing customers to pay in foreign currency by inflating the local currency price, using a rate of up to US$120 to US$1. A pharmacy in Harare was using an exchange rate of ZW$115 to the US dollar when the official rate is ZW$81 to the greenback.
Similarly a major meat retailer was using an exchange rate of ZW$110 to the US dollar, while many restaurants are charging in local currency at rates of up to US$120 to US$1.
A US$5 plastic pack of tablets at one pharmacy in Borrowdale was sold at ZW$575. Asked to explain the variance with a displayed exchange rate of ZW$81,44 at the pharmacy's till points and entry, an attendant said the ZW$81,44 was for nostro account holders while RTGS account holders paid at ZW$115 to US$1.
A two-week long investigation by the Independent between October 14 and 29 revealed that a number of companies were yet to comply with the directive. These have either not made a distinction between US dollar and Zimdollar purchases or have totally declared all USD purchases as ZWL at the official rate.
These include construction materials supplier, Halsted Builders Express, whose receipts show the total amount paid in local currency. Below the total amount paid, there is a line stating payment USD in brackets and then ZWL amount, not clearly indicating that payment was done in foreign currency. This is in contrast to invoices issued by businesses that are stating on the receipts just the USD amount tendered.
However, Halsted director Brian Rose insists the business is fully compliant.
At Zimbabwe Stock Exchange-listed mobile network operator Econet Wireless, this reporter recently purchased a voucherless airtime top up worth US$5 at its Sam Levy branch.
The receipt has two line items which say ZW$406,75 was paid and another which says US$406,75 was paid. It gives the impression that the airtime was paid for in local currency.
When asked for comment, Econet said it was complying with the government directive.
"For airtime and bill payments in foreign currency, we currently issue manual receipts as we are not currently able to produce electronic receipts for such purchases. We have requested Zimra for an extension of up to the end of November 2020 to allow us to be able to set up the system to electronically receipt foreign currency purchases of airtime and bill payments," Econet said.
The biggest culprits are perhaps in the fuel industry where no receipts are issued on all cash payments be it in local currency or USD.
State-owned enterprises were also found wanting when it came to implementing SI185 of 2020.
A source in the Ministry of Finance said there was consultation in government for a lasting solution.
He said some corporates were reluctant to comply, and bragged that Zimra was not enforcing the law because the current environment was likely to change post-Covid-19 pandemic.
Efforts to get an official comment from Finance minister Mthuli Ncube's office were fruitless.
However, a senior staffer in the ministry confirmed deliberations by Zimra, the Treasury and Reserve Bank of Zimbabwe for punitive measures against offenders were underway.
A top official in the Office of the President and Cabinet told this publication there were concerns around levels of non-compliance with suspicions Zimra was "either complicit or just napping on the job".
The revenue collector said it was aware of malpractices and non-compliance by some business operators who were receipting foreign currency as local currency purchases with a bid to evade payment of taxes in foreign currency. Zimra said some did not even keep records of the transactions.
Zimra said it had rolled out awareness campaigns on electronic, print and social media so that all operators were aware of government legal requirements on both currency receipting and fiscalisation.
"This revenue enhancement project is currently ongoing, tax revenue is being recovered with offenders being penalised and interests being levied on identified cases. Also those found on the wrong side of the law will have all their income deemed to be in forex and taxed accordingly and will face prosecution," it said.
"Zimra has requested all fiscal suppliers to configure all gadgets in the market appropriately per currency."
The tax collector has also embarked on massive tax audits on all businesses transacting in foreign currency.
RBZ governor John Mangudya said his office was "greatly concerned" about the lack of compliance in the industry both on the exchange rate and proper receipting of transactions.
This comes after government in July allowed the use of foreign currencies under SI185 of 2020, which requires dual pricing, quoting and offering of prices for goods and services. Compliance is also in accordance with the VAT Act Section 38 (4) and Finance Act Section 4.
Zimbabwe Revenue Authority (Zimra) has introduced hefty fines and penalties including assuming all revenues collected by offenders are in foreign currency to encourage compliance.
An investigation by the Zimbabwe Independent shows several companies are receipting United States dollar cash payments as local Zimbabwean dollar purchases.
In some cases, this is being done to deliberately evade remitting taxes in forex for all purchases done in that currency, in particular the greenback, while for others it is because they are yet or in the process of installing the systems to electronically receipt foreign currency purchases.
Some business operators are enticing customers to pay in foreign currency by inflating the local currency price, using a rate of up to US$120 to US$1. A pharmacy in Harare was using an exchange rate of ZW$115 to the US dollar when the official rate is ZW$81 to the greenback.
Similarly a major meat retailer was using an exchange rate of ZW$110 to the US dollar, while many restaurants are charging in local currency at rates of up to US$120 to US$1.
A US$5 plastic pack of tablets at one pharmacy in Borrowdale was sold at ZW$575. Asked to explain the variance with a displayed exchange rate of ZW$81,44 at the pharmacy's till points and entry, an attendant said the ZW$81,44 was for nostro account holders while RTGS account holders paid at ZW$115 to US$1.
A two-week long investigation by the Independent between October 14 and 29 revealed that a number of companies were yet to comply with the directive. These have either not made a distinction between US dollar and Zimdollar purchases or have totally declared all USD purchases as ZWL at the official rate.
These include construction materials supplier, Halsted Builders Express, whose receipts show the total amount paid in local currency. Below the total amount paid, there is a line stating payment USD in brackets and then ZWL amount, not clearly indicating that payment was done in foreign currency. This is in contrast to invoices issued by businesses that are stating on the receipts just the USD amount tendered.
However, Halsted director Brian Rose insists the business is fully compliant.
At Zimbabwe Stock Exchange-listed mobile network operator Econet Wireless, this reporter recently purchased a voucherless airtime top up worth US$5 at its Sam Levy branch.
The receipt has two line items which say ZW$406,75 was paid and another which says US$406,75 was paid. It gives the impression that the airtime was paid for in local currency.
When asked for comment, Econet said it was complying with the government directive.
"For airtime and bill payments in foreign currency, we currently issue manual receipts as we are not currently able to produce electronic receipts for such purchases. We have requested Zimra for an extension of up to the end of November 2020 to allow us to be able to set up the system to electronically receipt foreign currency purchases of airtime and bill payments," Econet said.
The biggest culprits are perhaps in the fuel industry where no receipts are issued on all cash payments be it in local currency or USD.
State-owned enterprises were also found wanting when it came to implementing SI185 of 2020.
A source in the Ministry of Finance said there was consultation in government for a lasting solution.
He said some corporates were reluctant to comply, and bragged that Zimra was not enforcing the law because the current environment was likely to change post-Covid-19 pandemic.
Efforts to get an official comment from Finance minister Mthuli Ncube's office were fruitless.
However, a senior staffer in the ministry confirmed deliberations by Zimra, the Treasury and Reserve Bank of Zimbabwe for punitive measures against offenders were underway.
A top official in the Office of the President and Cabinet told this publication there were concerns around levels of non-compliance with suspicions Zimra was "either complicit or just napping on the job".
The revenue collector said it was aware of malpractices and non-compliance by some business operators who were receipting foreign currency as local currency purchases with a bid to evade payment of taxes in foreign currency. Zimra said some did not even keep records of the transactions.
Zimra said it had rolled out awareness campaigns on electronic, print and social media so that all operators were aware of government legal requirements on both currency receipting and fiscalisation.
"This revenue enhancement project is currently ongoing, tax revenue is being recovered with offenders being penalised and interests being levied on identified cases. Also those found on the wrong side of the law will have all their income deemed to be in forex and taxed accordingly and will face prosecution," it said.
"Zimra has requested all fiscal suppliers to configure all gadgets in the market appropriately per currency."
The tax collector has also embarked on massive tax audits on all businesses transacting in foreign currency.
RBZ governor John Mangudya said his office was "greatly concerned" about the lack of compliance in the industry both on the exchange rate and proper receipting of transactions.
Source - the independent
