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Prosper Ndlovu, Business Editor
THE Zimbabwe Revenue Authority (Zimra) is only collecting a paltry 25 percent in forex tax despite a spike in deposits of the same to US$1,1 billion recently.

An estimated 50 percent of local transactions are now being conducted in forex, according to the Reserve Bank of Zimbabwe (RBZ), after Government gave consumers the greenlight to use free funds in local trading. The poor forex tax performance so far is indicative of the high level of non-compliance with tax regulations and rampant malpractices by business players.

Forex taxation has come under spotlight since June 17 when the Apex Bank announced the dual pricing system, which meant that businesses can now accept payments in foreign currency.

The announcement was followed by the gazetting of Statutory Instrument 185 of 2020 as the Exchange Control (Exclusive Use of Zimbabwe Dollar for Domestic Transactions) (Amendment) Regulations, 2020 (No. 3). This was aligned with the provisions of Section 4A of the Finance Act, which requires that tax be paid in the currency of transaction.

However, Zimbabwe Revenue Authority (Zimra) Commissioner Ms Faith Mazani said the tax authority has observed with greater concern malpractices involving forex tax, as some businesses are not recording transactions being tendered for in foreign currency. She was speaking during a joint virtual Press conference on taxation of forex business income hosted by the RBZ and the tax authority, yesterday.

“Where transactions have been recorded, part or all the foreign currency tendered is not being declared for tax purposes. Transactions in foreign currency are being written in manual registers while operators are receiving foreign currency from their customers and issuing them RTGS receipts,” said Ms Mazani.

“Foreign currency tendered is not being banked. Parallel manual invoicing is being used for recording transactions involving foreign currency, and such invoices are not declared for tax purposes.

“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 nor declared on returns.”

In some cases, the Zimra boss said offline separate systems were being kept for transactions involving foreign currency, she said, adding that the above behaviours were a direct violation of the provisions of the Finance Act and VAT Act.

RBZ Governor, Dr John Mangudya, who also attended the virtual presser revealed that forex deposits in the country have risen to US$1,1 billion with US$405 million being held in domestic Foreign Currency

Accounts (FCA). He, however, said the increase in forex deposits and growth in forex transactions has not resulted in a corresponding increase in forex tax.

“We have seen a gradual and consistent growth in forex transactions and deposits. From total bank deposits of US$840 million at the beginning of the year, we now have US$1,1 billion as of last month,” said Dr Mangudya.

“If we use this money locally, we don’t have to borrow, we just need to circulate the money. But the issue of compliance with rules and regulations is an area of weakness. Taxes should be paid in the currency used in trading.”

Ms Mazani and Dr Mangudya said their organisations would increase collaboration towards mechanisms to enforce compliance and called on business to respect the tax law. Ms Mazani said businesses were required at law to ensure that, in all instances, documents recording sales (invoices, tax Invoices, till slips, receipts or other documents recording sales) were issued to the customers in terms of the currency used to transact.

“Fiscalised registered operators are required to produce fiscalised documents. Where a sale is made in Zimbabwe dollars, the invoices/till slips/receipts recording the sale must be issued in Zimbabwe dollars,” she said.

“Where a sale is made in foreign currency, the invoices/till slips/receipts recording the sale must be issued in foreign currency,” said Ms Mazani.

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

Concerning areas of non-compliance she challenged clients to come forward and make voluntary disclosures while calling on members of the public to insist on being issued invoices, tax invoices, receipts for business transactions done reflecting the correct currency of transaction.

“Where sellers issue discounts to their customers in either ZWL$ or foreign currency, they must issue credit and or debit notes to correctly record the changes in currency of trade,” said Ms Mazani.

“Report any act that contravenes the tax provisions. Utilise our whistle blowing facility where the identity of the informer is kept in strict confidentiality.”

The Zimra boss said tax audits focused on foreign currency were ongoing and warned that non-compliance will be sanctioned through the charging of penalties and interest, prosecution, naming and shaming.