Online Reporter
Zimpapers Business Hub
Tax reassessments by the Zimbabwe Revenue Authority for the 2021 and prior years have ignited a high-stakes legal battle.
At the heart of the disputes is a difficult question: Can the tax authority retrospectively claim US dollars (USD) for debts originally assessed and settled in Zimbabwe dollars?
After Zimbabwe converted its financial records to Zimbabwe Gold (ZiG) in April 2024, the resolution of these cases will set a critical precedent for currency nominalism and the finality of tax assessments.
ZIMRA’s current strategy involves isolating the foreign currency revenue component from tax returns based on the turnover ratio method.
For the 2021 tax year, where a single ITF12C return ( Income Tax Self-Assessment Return) was filed, the taxman is trying to translate that foreign currency portion of the Zimbabwe dollar liability into US dollars using 2021 average exchange rates.
ZIMRA argues the tax liability was always in foreign currency and despite the return being filed in Zimbabwe dollars, relying on the currency of payment provisions. This could apply from 2022, when the law provided for separate returns by currency.
Legal experts argue this is maybe an unlawful attempt at revalorisation – trying to recover the lost value of a depreciated currency by indexing it to a stable one after the fact.
Central to the legal experts’ argument is the Supreme Court ruling in Falcon Gold Zimbabwe Limited v Taxing Officer, which firmly anchors the principle of currency nominalism.
This principle states that a monetary debt, once fixed, must be paid in its nominal currency amount without retroactive revaluation to account for currency depreciation or inflation.
ZIMRA’s efforts to retrospectively apply US dollar exchange rates on Zimbabwe dollar self-assessment are, effectively, seen as an attempt to “revalorise” the debt — an act the Supreme Court has, so far, rejected.
Analysts say this monumental judgment shifts the risk of currency depreciation squarely onto the tax authority and prevents it from penalising taxpayers for economic fluctuations beyond their control.
Further strengthening this position is the High Court ruling in the Unki Mines v ZIMRA, which ruled that specific assessment parameters override general statutory provisions.
ZIMRA’s reliance on Section 4A(1)(c) of the Finance Act, which prescribes that tax is payable in the currency of trade, according to the court judgments, cannot override the taxpayer’s valid election and submission of returns in ZWL under Public Notice 39 of 2022.
The court’s emphasis on the binding validity of the assessment means that retroactively forcing US dollar payment may not only be procedurally flawed but also legally invalid, especially when the income was fully declared and assessed in the local currency.
“The courts have recently reaffirmed that monetary obligations are generally discharged at their nominal value, regardless of subsequent currency depreciation. That principle is relevant when considering whether past exchange rates can be applied to settled liabilities,” Rudo Mugandani, head of the tax department at Scanlen and Holderness, said.
Statutorily, the adoption of SI 60/2024 and Public Notice 37 of 2024 appear to further cement this assertion by mandating the conversion of Zimbabwe dollar balances into the new digital currency ZiG at fixed rates. This conversion legally crystallises the debt in ZiG terms, allowing for settlement at current rates without reopening or recalculating liabilities based on historical USD values.
“Our reading of SI 60 of 2024 is that it provides for the conversion of existing balances, not the reconstruction of past tax liabilities using historic exchange rates,” Mr Mugandani said.
Analysts have expressed fear that ZIMRA’s approach may undermine these statutory instructions and appear to introduce legal complexities into its tax system by side-stepping the supremacy of specific assessments and the currency nominalism doctrine.
This debate is far from academic – it reveals the tension between tax administration pragmatism and legal protections against currency volatility.
Taxpayers who complied in good faith with the lawful assessment process face a potential double whammy of currency devaluation and retroactive exchange rate adjustments, jeopardising their financial stability and undermining confidence in Zimbabwe’s fiscal regime.
Another legal expert, Fidelis Manyuchi, emphasised that “one of the foundational principles of tax law is certainty. Once a taxpayer has complied with the law as it stood at the time of filing, any retrospective change to the basis of assessment would require clear statutory authority.”
ZIMRA’s current reassessment stance, so far, appears to not only go against some court precedents and statutory provisions, but may bring new precedents to the interpretation of the principle of legal certainty in tax matters.
Analysts and tax experts argue that authorities must respect the nominal value of tax debts as fixed in local currency and leverage the new statutory framework wisely to balance revenue collection with fairness and predictability. Anything less risks eroding investor trust..
