Some businesses are reportedly prejudicing Government of taxes in foreign currency by failing to comply with regulations that compel them to receipt all transactions in the respective currency of payment.

Failure to receipt transactions in the currency of payment means businesses only capture figures in Zimbabwe dollars and pay taxes in local currency despite conducting their business in foreign currency, mainly the United States dollar.

In July this year, Government, through Statutory Instrument 185 of 2020, allowed local transactions to be conducted in foreign currency.

Businesses were required to display dual pricing in their outlets, receipt transactions in the currency of payment, as well as remit taxes accordingly.

Tax laws in Zimbabwe, therefore, require taxpayers to remit taxes in the currency in which the transaction is done in terms of Section 38 of the VAT Act and the Finance Act.

However, a survey done by The Sunday Mail Business over the past two weeks outed several businesses, large and small, that are not fully complying with the law, and, in the process, prejudicing the taxman of the much-needed foreign currency.

In downtown Harare, some smaller businesses have resorted to receipting transactions done in USD in local currency, while others do not receipt at all.

In some instances, businesses such as pharmacies are converting United States dollars using the illegal parallel market rates instead of the official Reserve Bank of Zimbabwe (RBZ) auction rate.

In cases where medication costs US$1, the pharmacies charge as much as $120, despite the official rate being $81.

Some businesses, however, claimed they do not have the technology to comply with the regulations.

Big corporates such as mobile network provider, Econet, indicated they have started working towards compliance.

“We display both Zimbabwe dollar and US dollar pricing in all our shops. These are changed on a weekly basis as, or if, the auction rate changes. We have implemented foreign currency receipting on our device (handset) sales across all our shops.

“Well over 90 percent of our airtime sales and bill payments are done electronically by customers — from their phones using EcoCash, or through banking channels in local currency.

“The small remainder of customers that purchase our airtime or pay our bills in foreign currency are for now issued with manual receipts.

“We are currently working with ZIMRA, whom we requested for an extension till month-end, to complete setting up the system that will enable us to electronically receipt foreign currency purchases of airtime and bill payments,” said Econet via email.

Other big retailers like Pick n Pay, AMP Meats, among others, are at varying levels of compliance depending on branch and location, while local authorities were found wanting.

It is understood the Zimbabwe Revenue Authority (Zimra) introduced fines and penalties for tax offenders and has come up with revenue enhancement measures.

Zimra vice chairperson Ms Josephine Matambo indicated in the authority’s 2020 third-quarter report that part of the measures include “checking compliance status of Value Added Tax (VAT) operators trading in foreign currency”.

According to the report, VAT on local sales accounted 13,2 percent of the total revenue $56,9 billion collected during the quarter.

The revenue head registered a 789 percent jump to $7,5 billion on the back of enhanced collection and efficiencies and use of fiscal devices.

“The revenue head registered a positive performance in both gross and net terms due to increased operations by businesses, enforcement of the use of fiscal services by registered operators, which leave an audit trail of transactions and compliance checks being done by the Authority,” she said.

Retailers have, however, bemoaned limitations caused by shortage of fiscal devices to fully comply with the directive.

In a recent submission, Confederation of Zimbabwe Retailers (CZR) called on retailers and wholesalers to support the foreign currency auction system through compliance and responsible pricing.

This follows observations of pricing distortions by both retailers and wholesalers.

“The CZR wishes to remind retail sector players of the existence of legal requirement that compels them to comply with the newly introduced foreign currency exchange rate system.

“The customer receipt should bear the currency in which the transaction has taken place,” said CZR president Denford Mutashu.

He, however, highlighted implementation challenges such as unavailability of fiscalised machines and software comparability that the sector faced.

He said: “There is a need to increase suppliers of fiscalised machines and the current number remains few while those supplying in some instances have failed to avail spare parts for the machines.

“CZR has collected the majority of sector views on the matter and is currently engaging Government to iron out the challenges.

“It is critical that sector members continue to comply with regulations while we engage Government on the matter.”

Government allowed people to transact using multiple currencies to ease payment challenges caused by Covid-19.

-Sunday Mail