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Business Reporter
THE Financial Intelligence Unit (FIU), a department under the Reserve Bank of Zimbabwe, is investigating cases where companies may be conducting transactions in US dollar cash to avoid taxes, depriving the country of revenue.
Finance, Economic Development and Investment Promotion Deputy Minister David Mnangagwa told Parliament last week that some businesses were evading tax by transacting in US dollar cash.
He said some businesses had figured out ways of avoiding paying taxes and were conducting business in US dollar cash, adding the authorities are now looking into the matter.
“In their computations, they realise that if they are operating in US dollars (cash), they can evade ZIMRA (Zimbabwe Revenue Authority) and will still make more money,” said Deputy Minister Mnangagwa. “These are areas that FIU is now actively looking at.”
The re-dollarisation trend has deepened significantly, with domestic sales conducted in foreign currency now estimated to be around 85 percent. The surge in US dollar transactions, however, raises concern as a significant portion is in cash.
The situation is further compounded by the informal nature of the economy, where many businesses operate outside formal channels, making it even harder to track transactions and enforce tax regulations.
A snap survey by this publication found that some businesses are offering big discounts to customers if they agree not to have their purchases tracked by the Government. These transactions are basically happening off the books, meaning they are not documented by fiscalised devices that record sales and tax information on the read-only server directly linked to ZIMRA.
Alternatively, customers are offered manually written receipts. Such arrangements easily entice customers who are ordinarily attracted by the huge US dollar cash discounts. On the other hand, such businesses are benefitting from huge sales volumes.
“Technically, the discount that we offer to customers who accept not to be given receipts is basically a portion of the tax,” said a shop owner who sells auto spares.
“So, the customer benefits from a lower price while I also boost my sales. At the end of the day, it is the Government that suffers. I can assure you that the practice is widespread.”
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube warned last year that the return to using US dollars alongside a large informal economy could cripple tax collection. He highlighted the risk of transactions happening “off the books” due to the prevalence of cash in the informal sector.
He said the Government would consolidate the stabilisation measures and strengthen tax collection efficiency through audits and other administrative actions.
Minister Ncube said the Government was modernising tax systems, broadening the tax base, as well as introducing more efficient ways of raising revenue from the informal sector.
ZIMRA said it was countering the underhand dealings by ensuring that all value added tax operators were fiscalised, while their devices record the local currency and foreign transactions.
It said the Block Management System that classifies all taxpayers into specific geographical locations or zones to improve tax collection from the informal sector will also go a long way in identifying where transactions are in forex and ensuring they are accounted for in full.
Online Reporter