THE Zimbabwe Revenue Authority (Zimra) Commissioner-General Faith Mazani has called for monetary and fiscal policies alignment as the depreciating Zimbabwe dollar (ZWL) has made it difficult to plan.
BY TATIRA ZWINOIRA
The local currency continues to lose value daily eroding individual and corporate earnings which affect the taxman’s ability to collect taxes when Treasury is targeting revenue collections of $58,6 billion for 2020.
“In a volatile environment like we are going through, it becomes very necessary to always ensure that the monetary and fiscal policies are aligned. The most notable policy changes have been the movement from multi-currency to ZWL through SI 142 and the reporting currency for tax purposes is now ZWL according to SI 33,” said Mazani, at an Annual Tax Review Breakfast meeting hosted by a privately owned weekly yesterday.
“The depreciation of the Zimbabwe dollar has made business planning difficult and seen a number of exporting companies being taxed on exchange gains that make it difficult to plan. As the exchange rate fluctuates tax allowances are eroded, and this particularly affects capital allowances bought when the exchange rate was at 1:1.”
As previously reported by our sister paper, The Standard, a report from local financial services firm IH Securities found that corporate earnings for listed companies will take a severe knock this year due to the depreciating ZWL.
Labour unions have complained that workers wages were continuing to be eroded as the value of salaries are increasingly depreciating, also on the back of a failing ZWL.
The depreciating ZWL has also affected informal traders’ monthly earners.
As a result, corporate, individual and presumptive taxes, respectively, are under threat, forcing the Zimra to target foreign currency earning firms.
“With some sectors like the tourism and the mining sectors continuing to operate in foreign currency, doing tax returns and also processing these returns in dual or multi-currency has presented challenges for both taxpayers and the authority. This has particularly been difficult as it requires systems to be changed,” Mazani said.
“Taxpayers need to know that the law still requires those conducting business in foreign currency to report their tax affairs in foreign currency, even if they are doing it illegally. Zimra has the responsibility of enforcing existing laws that require payment of tax in forex for example where sales of goods and properties liable to capital gains tax are also in forex.”
She said that the taxman was also preparing strategies on taxation under the African Continental Free Trade Area once it becomes operational to position the country to take advantage of the trade agreement.
Deputy Finance minister Clemence Chiduwa said his ministry was aware of the tax administration issues posed by the change from a multi-currency regime to a mono-currency one.
“We are aware that given the inflationary dynamics, our expenditure may end the year more than our target. But, this gives me reason to urge you, as businesses and individuals to comply with your tax obligations if we are to overcome the challenges that we face as a country,” he said.
“We are aware of the challenges that companies, and individual taxpayers are facing in this environment, but concerted efforts to pay taxes are important for us to generate revenues that we need to intervene in our obligations.”