RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya, pictured, yesterday said the country partly dollarised to allow citizens to use foreign currency they get from their relatives in the diaspora.
Addressing a virtual press conference jointly held by the RBZ and the Zimbabwe Revenue Authority, Mangudya warned businesses transacting in foreign currency, but electing to pay tax in local currency that they would be prosecuted.
“Whether we have dollarised or not is measured in terms of the magnitude of the US$ in the economy and our situation at present, in terms of that, is that we are a medium-term dollarised economy,” Mangudya said.
“That is normal for almost all countries and if you take the Democratic Republic of Congo, for instance, you will realise that it is 70 percent dollarised, but they also use their Francs. The problem in Zimbabwe is that we spend a lot of time on definitional arguments instead of the reality on the ground.”
The RBZ chief said it would be a misnomer for the monetary authorities to disallow citizens to use the foreign currency they get from diaspora remittances.
“I can tell you today that we have received 33 percent more in diaspora remittances from January to July 2020, than the same period last year despite the coronavirus (Covid-19) pandemic that most expected would affect the remittances. During the same period last year, we had US$349 million as compared to US$446 million this year,” he said.
Mangudya bemoaned that some businesses were transacting in US$ yet they were paying their taxes to Zimra in local currency, warning that such behaviour was tantamount to fraud.
“One area of weakness is absence of compliance with the exchange control and tax regulations. We have foreign currency deposits in the domestic foreign currency accounts increasing yet we are not seeing a corresponding increase in Zimra collections. We need to insist on compliance because we expect to see revenue collection increasing correspondingly when we have 50 percent of the transactions being done in foreign currency,” said Mangudya.
Zimra commissioner-general Faith Mazanhi weighed in saying the tax collector was undertaking an audit to fish out unscrupulous businesses transacting in foreign currency, but not producing invoices to that effect to avoid paying tax in US$.
“We have seen business malpractices whereby they do not record transactions in foreign currency as they write them on manual receipts, do not bank and have parallel manual invoices in violations of Statutory Instrument (SI 185/2020). We encourage business in all instances to produce till slips, tax invoices for all transactions in foreign currency. Clients must come forward when they see such practice so that penalties will be imposed on the concerned businesses,” Mazanhi said.
According to the statutory instrument provisions of mandatory dual pricing, anyone who sells goods or services in Zimbabwe “Shall display, quote or offer prices in both the Zimbabwe dollar and foreign currency at the ruling exchange rate”.-Daily News