Friday, 21 August 2020

ZIMRA DECLARES WAR ON FOREX TAX FRAUD


THE Zimbabwe Revenue Authority (Zimra) and the Reserve Bank of Zimbabwe (RBZ) have declared war on business entities accepting foreign currency for goods and services, but illegally receipting these transactions in local currency, saying the culprits will be named, shamed and prosecuted.

Under the law, all businesses and individuals have to pay taxes in the currency of their sales in proportion to each currency used.

A number of such businesses selling at least some goods and services in foreign currency, mostly US dollar, are receipting those sales in Zimbabwean dollars, which allows them to pay the resulting tax share in local currency, and thus potentially face charges of tax fraud.

The Government recently authorised the pricing of goods and services in both local and foreign currency but using the ruling auction rate for conversions.

It has been the law for some time that taxes have to be paid in the currency of the revenue.

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 Value Added Tax 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 the appropriate taxes in the same currency. 

Zimra and the RBZ yesterday addressed a joint virtual press conference where they warned against foreign currency tax fraud.

Zimra Commissioner–General Faith Mazanhi appealed to the public to report any receipting and tax-related malpractices by retailers and other traders.

She said naming, shaming and prosecution will be applied to those who deliberately cook up false receipts to avoid paying taxes in foreign currency.

“I would want to encourage our business community to be good corporate citizens for the betterment of our economy.

“Tax audits focused on monitoring of tax payments in foreign currency are currently ongoing. Any detected non-compliance will be sanctioned through the following as provided in the law: charging of penalties and interest, prosecution and naming and shaming.

“Our valued clients are therefore encouraged to avoid attracting the sanctions and do the honourable by correctly declaring all their tax in full, on time, all the time,” said Mrs Mazanhi.
  
The Zimra boss urged people to use the authority’s whistle-blower facility and report any malpractices.

She said customers must insist on being issued with a correct receipt showing the currency of the transaction.

“Zimra further encourages members of the public to insist on being issued invoices, tax invoices, and receipts for business transactions done reflecting the correct currency of transaction.

“Where sellers issue discounts to their customers in either local or foreign currency, they must issue credit and or debit notes to correctly record the changes in currency of trade.

“You must report any act that contravenes the tax provisions. Use our whistle blowing facility where the identity of the informer is kept in strict confidentiality,” she said.

RBZ Governor Dr John Mangudya said the bank was also fighting forex tax fraud. The RBZ now has a toll-free number to facilitate reports of malpractices.

“To complement the whistleblowing facility, we have come up with a toll-free number to facilitate reports of malpractices by business entities with a view to ensure Zimra collects all taxes for economic growth.

“Some businesses are coming to the foreign currency auction and buying US dollars at the rate of US$1: $82 but they go on to sell their goods at the rate of US$1: $95. 

“We will play our part as RBZ to ensure we walk the talk on punishing such offenders,” he said.

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, which is frequently not the auction rate.

Zimra also carried its own research and established that some businesses are not recording transactions being settled in foreign currency and 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 foreign currency tendered is not being banked, the investigation revealed.

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 as required by law.

Some traders have created back offices and banking halls where forex payments are being received but not receipted nor declared on returns. Herald

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