Last week the Zimbabwean government did another switcheroo. The Willing-Buyer Willing-Seller rate is now the country’s official rate-replacing the auction rate which remains low and unmoving in the face of the flying black market rates. One government institution which was specifically named in the “economic measures” speech was ZIMRA the all-important revenue-raising arm of the government. They are now required to use the willing-buyer willing-seller rate when conducting their everyday business. In a public notice, ZIMRA has now acknowledged that they will be using this new rate instead of the old auction rate.
PAYMENT OF TAX IN THE CURRENCY OF TRANSACTION
Following the announcement by His Excellency, the President of the Republic of Zimbabwe, Cde Emmerson D. Mnangagwa on policy measures to restore confidence, preserve value and restore macroeconomic stability, the Zimbabwe Revenue Authority (ZIMRA) wishes to advise all taxpayers that for the purposes of conversation of foreign currency to Zimbabwean dollar; where aplicale, the rate of exchange established through the Willing-Buyer Willing-Seller exchange rate system as provided by the Reserve Bank of Zimbabwe should be used with immediate effect.
All taxpayers should ensure that tax is accounted for in the currency of transaction.
Payments for all taxes should be remitted on time, on time, in full and in the currency of transaxion through banks.
Taxpayers are urged to submit all tax returns on time and payments should be mad ein full.ZIMRA notice on the rate change
Now here is something to note. ZIMRA requires you to pay taxes in the currency of the transaction. So if you make a sale in USD you are supposed to pay the tax for that item in USD be it VAT or whatever tax is applicable. So given this clearly whatever rate is in use is not important. Right? Wrong. You see businesses are not stupid they have been converting their sales in USD to ZWL at the official rate. This would lead to massive tax savings. It is not easy for ZIMRA to prove that a sale was conducted in USD because both parties have an incentive not to report this to ZIMRA. At least with the WBWS rate, ZIMRA will be able to get a decent share of their tax but it is still nowhere near what they would get if the government would just float the exchange rate instead of rigging it under various guises.
This is the sixth time we have seen the ZWL USD official rate change basis:
- First, the rate started at 1:1 even when it clearly was not
- Then in February of 2019, the rate was changed to 2.5
- Then we had an interbank rate
- The rate was then fixed at 25 for a while before being rarely adjusted as the government pretended that the rate was the “right one”
- We then had the auction which worked for a while then the rate started to suspiciously lag behind
- Then we came back to the interbank rate which now has a new name willing-buyer willing-seller
Dubious new terms are a government speciality. We have Nostro accounts that are not even Nostro accounts all in a bid to convince people to deposit their hard-earned money because Nostro accounts are “ring-fenced”.