MOST businesses selling goods and services in US dollars
are receipting the money in Zimbabwean dollars, opening themselves to potential
charges of tax fraud.
The Government recently authorised the pricing of goods and
services in both local currency and the US dollar, but using the ruling auction
rate for the conversions.
At the same time, it has been the law for some time that
taxes have to be paid in the currency of the revenue, so that a business that
receives 13 percent of its revenue in foreign currency and 87 percent in local
currency would pay 13 percent of its company taxes in foreign currency and 87
percent in Zimdollars.
More critically, this rule applies to all taxes, meaning
that VAT in particular has to be accounted for separately for each currency
used in sales.
The only way of satisfying tax inspectors is having
receipts that indicate the currency of the transaction so that the business
will pay appropriate taxes in the same currency.
At the same time all cash, local or foreign, is supposed to
be banked, with foreign currency obviously banked into an FCA account, usually
the same one that receives electronic foreign currency payments.
Business entities, in terms of Statutory Instrument
185/2020, are obliged to display, quote and accept payment in both the local
currency and US dollar, using the prevailing foreign currency auction rate.
However, most wholesalers, retailers and manufacturers are
yet to display prices in both currencies.
Although many now prominently display the conversion figure
they use, there has been no ruling yet if this fulfils the requirement but
customers now know in advance just what rate is being used and that seems to
meet the requirements in spirit if not in detail.
Some, to minimise the complexities of two currencies, have
their own bureau de change in-shop where the money is changed first and so all
payments are in local currency.
Authorities are able to monitor the money changing under
the rules that bureaux de change have to follow.
An investigation by The Herald has found that a number of
registered shops in Harare’s city centre, the industrial area as well as high
density suburbs are accepting US dollars but issuing the receipts in Zimbabwean
dollar equivalent at a rate of their choice.
A tax expert, Mr Sylvester Ruzvidzo of Sylve Accounting
Services said any payment done in foreign currency should be receipted in the
same currency for taxation purposes.
Traders issuing receipts in a different currency, according
to the expert, are committing potential tax fraud.
“If you pay for goods and services in foreign currency, you
must be issued with a foreign currency receipt. Shops that issue cooked-up
receipts will only do so with criminal intent. That is fraud which is killing
the country’s economy,” said Mr Ruzvidzo.
Zimra head of corporate communications Mr Francis Chimanda
said those who are not correctly declaring tax will soon be dealt with in terms
of the law.
“We are aware of what is happening in the market and Zimra
has a publicity drive through various media channels and our digital platforms.
“Individual companies are also being tracked per sector to
identify offenders and current focus includes hardware traders among others.
Large clients are being monitored closely as well.
“Any incorrect declaration by a registered operator will
result in all income deemed foreign currency income and all tax to be paid in
forex and not apportioned.
“The penalty is also very heavy for those falsifying
records to 100 percent of tax due. Prosecution of offenders is being intensified.
Failure to keep proper books and not banking is also prosecutable,” he said.
Mr Chimanda said Zimra had put in place a raft of measures
to minimise tax losses.
“Government may lose some revenue but this is being
minimised by a number of measures. Anyone who fails to declare correct forex
income and Zimbabwe dollar income will be deemed to have all income in foreign
currency.
“So traders need to know that Zimra has not started audits
to balance stocks and income. Voluntary disclosure letters are being
distributed to encourage compliance,” he said.
He added: “Zimra has engaged all fiscalisation suppliers to
make sure fiscal gadgets are configured to produce a receipt per currency of
purchase. A meeting has also been held virtually with operators to issue
correct invoices and account for their revenue correctly.
“Zimra has started forex audits by issuing voluntary
declaration letters to clients to own up and correct previous mistakes.” But
detailed audits will follow.
Retailers Association of Zimbabwe president Mr Denford
Mutashu confirmed the development but said some entities were complying with
the law.
“We have seen others that have complied, and there is
clearer indication of the currency being used, also genuinely remitting in the
currency they have used to sell their products.
“But in the same environment, others are not complying. We
have gone on a campaign on that regard. Some are doing it ignorantly and others
not. We have realised that the other issue is the problem of change. Some buy
in USD and the change comes in local currency and it creates problems in terms
of remitting. However, we encourage fair business practices,” said Mr Mutashu.
Confederation of Zimbabwe Industries (CZI) president Mrs
Sekai Kuvarika said her organisation had not done a survey on the potential problem.
“Personally, I have not encountered any big retailers doing that. Maybe that
practice is with small businesses while some of them are not properly
registered.
“Actually, we have not done a survey on that to see what is
happening in terms of receipting,” she said.
In one of the shops in Harare’s city centre, the reporter
bought two pressure files at US$2 each but was issued a receipt bearing the
total amount of $398.74, incidentally showing a higher-than-legal exchange
rate.
The reporter visited another shop near Charge Office bus
terminus where he bought a coffee mug for US$1 and was issued a receipt
reflecting the total amount of $80, which unlike the first shop was at least at
the correct exchange rate.
Another reporter paid US$3 for lunch at one of the biggest
retail shops along Mutare Road in Harare but was given a receipt showing $258
and some change in local currency.
At boutiques, flea markets and tuckshops in the city,
people pay in foreign currency but are not issued receipts. The same sort of
little businesses frequently omit all receipts, regardless of currency.
The same is also rampant at shopping centres in the high
density areas.
Also in the high density areas, some retail shops are now
strictly demanding US dollars and they have erected billboards listing the
foreign currency prices of their goods. Since few such shops issue any
receipts, it is impossible for the tax inspectors to figure out what taxes are
payable, let alone how they should be apportioned.
At Chigowanyika shopping centre in Chitungwiza, a number of
shops are strictly taking US dollars. But one shop was offering change in local
currency while at other shops the buyers were forced to pick other smaller
items in lieu of change.
A visit to hardware shops and brick-making companies around
Harare showed that most of them were trading in foreign currency but issuing
receipts in local currency. Herald
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