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Firms evade remitting forex taxes

by Staff reporter
04 Dec 2020 at 07:20hrs | Views
THE Zimbabwe Revenue Authority (Zimra) says it has detected a string of scams in which some companies charging for goods and services in foreign currency have evaded paying taxes in forex.

This manipulation of the tax system has prejudiced the country of millions of United States dollars in potential revenue, according to Zimra commissioner-general Faith Mazani.

In June, the central bank made key monetary policy shifts, in which Reserve Bank of Zimbabwe (RBZ) governor John Mangudya gave firms the green light to charge goods and services in both the local and foreign currencies.

This was a huge change of policy, which came after the RBZ had ended a decade long multicurrency system last year and re-introduced the Zimbabwean dollar as the medium of exchange for domestic transactions.

The RBZ said companies must display the price of goods in both the Zimbabwean dollar and the greenback in order to give consumers the option to pay in a currency of their choice, after it had become clear that the country was dollarising again.

After the RBZ's directive, government gazetted Statutory Instrument 185 of 2020, which compels businesses charging in forex to remit their taxes in foreign currency.

At the same time, transactions made in the domestic currency would require them to pay their taxes in Zimbabwean dollars.

But while addressing an annual conference of the Institute of Chartered Secretaries and Administrators in Nyanga last week, Mazani said the tax collector was worried by the level of violation of tax laws as firms try to evade paying taxes in forex.

"Among the observations made, Zimra noted that some businesses are not recording transactions being tendered for in foreign currency," Mazani said.

"Where transactions have been recorded, part or all the foreign currency tendered is not being declared for tax purposes," the Zimra boss said.

She said companies had shifted from keeping electronic records for foreign currency based transactions.

These were being recorded manually, with the cash kept away from government scrutiny, she said.

Mazani said the companies have been receiving foreign currency, then issuing receipts in Zimbabwean dollars.

This means for tax purposes, they have been presenting Zimbabwean dollar transactions to the taxman.

"There are stand-alone tills, which are not configured to the Zimra fiscalisation system. Some traders have created back offices and banking halls where forex payments are being received but not receipted or declared on returns," Mazani said.

She said offline separate systems were being kept for transactions involving foreign currency.

But these malpractices are a direct violation of the provisions of section 4A of the Finance Act, Mazani said.

"We have, therefore, thought it prudent, as Zimra to emphasise on the need for business to ensure that in all instances documents recording sales (invoices, tax invoices, till slips, receipts or other documents recording sales) are issued to the customers in the currency of transaction," she said.

Mazani said fiscalised registered operators are required to produce fiscalised documents.

"Where a sale is made in Zimbabwean dollars, the invoices/till slips/receipts recording the sale must be issued in Zimbabwe dollars. Where a sale is made in foreign currency, the invoices/till slips/receipts recording the sale must be issued in foreign currency."

"Where a sale is made in parts of Zimbabwe dollars and foreign currency the invoices/till slips/receipts must reflect such currency details," Mazani said.

She said where companies have not been complying with the law, Zimra encouraged them to come forward and make voluntary disclosures.

In the 2021 national budget delivered last week on Thursday, Finance and Economic Development minister Mthuli Ncube also said government was concerned that some companies were not complying with the requirement to pay taxes based on the currency of the transaction.

He announced more stringent measures in this respect, saying all registered operators who fail to install fiscal devices will not be issued with tax clearance certificates for next year.

Mazani said very soon Zimra will also roll out a campaign that encourages members of the public to insist on being issued invoices, tax invoices, receipts for business transactions that reflect which transaction they used for paying for their goods and services.

She said tax audits focussed on monitoring tax payments in foreign currency were currently underway.

Mazani said any detected noncompliance will be sanctioned through penalties and interest, prosecution as well as naming and shaming non-compliant firms.

Source - newsday

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