Recently the Zimbabwean government published their latest change of car ownership fees. This is after they raised these fees. Change of ownership fees are paid when you buy a second-hand vehicle in Zimbabwe. These fees are payable either in ZWL or USD depending on the currency in which you bought the vehicle. Given how easy it is to fake this currency on the invoice (most Zimbabwean companies generate two invoices one in USD and one in ZWL depending on circumstance), add the fact that the official rate s currently at around 108 ZWL per 1 USD much lower than the black market rate of $210 ZWL per 1 USD, most people would just have ended up paying this fee in ZWL as it would be cheaper for them to go to the black market, change their money at black market rates and pay this fee.
To combat this potential abuse, the Zimbabwean government has one-upped its citizens by using a semi-black market rate itself when coming up with the fees. Instead of using the official rate of 108 ZWL, they have instead used a rate of 130 ZWL per 1 USD. Is this a bad thing? The answer is yes and no depending on how you look at it. First, let us take a look at some of the rates:
|How long ago the car was manufactured||Engine Capacity||New Excise Duty Rate (US$)||New Excise Duty Rate (Z$)|
|0-4 years ago||Up to 1000 CC||$300||$39 000 ZWL|
|0-4 years ago||1001-1500 CC||$400||$52 000 ZWL|
Now here is a comparison between using a rate of $130 ZWL and a rate of $108 ZWL
|How long ago the car was manufactured||Engine Capacity||New Excise Duty Rate (US$)||ZWL fees $108 with US as base||New Excise Duty Rate (Z$)||US fees if ZWL is base|
|0-4 years ago||Up to 1000 CC||US$300||$32 400 ZWL||$39 000 ZWL||US$361|
|0-4 years ago||1001-1500 CC||US$400||$43 200 ZWL||$52 000 ZWL||US$481|
From the above, we can conclude that if the original duty was based on a duty set in USD i.e. the base, using a rate of $108 would have been beneficial to those who opted to pay their duty in ZWL. The truth though is we simply don’t know what the original currency used to come up with the rate was. Because if the base was in ZWL and then converted back to USD those who are paying in USD will end up paying less than what they would have otherwise paid if a rate of 108 ZWL had been used. So it is all very relative.
The thing though is why call something an official rate when no one is using it? One cannot help but come to the conclusion that the official rate is something the government came up with to put the citizenry at a disadvantage. It’s often used to coerce businesses to convert between ZWL and USD prices and is used to force exporters to surrendy a portion of their USD proceeds into ZWL at suboptimal rates. When the rate puts the government into a bad position they simply wave their legislation wands and exempt themselves. The trouble with a rate that is not a market rate is that they need to do this more and more resulting in tangling knots of Statutory Instruments. In the end confused citizens simply end up ignoring these laws.