By Alois Vinga
Most companies are still reluctant to fully disclose their sales revenue in foreign currencies, a development widely seen by market watchers as a loophole that could be exploited to avoid collecting tax revenue in US dollars.
At the height of the Covid-19 pandemic two years ago, the Reserve Bank of Zimbabwe (RBZ) decided to enact Statutory Instrument 85 of 2020 which allowed the public to use their foreign currency to buy and sell goods, marking a decline from a strictly Zimbabwean dollar economy.
The development has enabled businesses to take advantage of the regulatory measure as a source of foreign currency generation.
However, a recent analysis of NewZimbabwe.com Business shows that although there is no legal requirement to report US dollar sales, based on morality, a number of listed companies are still reluctant to disclose details of their foreign currency sales simply as a sign of reciprocity to the initiatives implemented by the monetary authorities.
Market watchers believe that continued silence on such statements will penalize citizens likely to benefit from such US dollar tax payments and make it difficult to determine the impact of the relevant regulatory directive on businesses and the economy.
Confederation of Zimbabwe Industries (CZI) chairman Kurai Matsheza insisted they operate above the law.
“The reference currency in Zimbabwe is currently the Zimbabwean dollar. It is therefore the legal obligation for companies to declare their performance in the local currency. However, for tax purposes and for the 20% that goes to the tax office, companies that sell in US dollars declare sales in foreign currencies so that they pay the taxes,” he said.
Asked whether companies are taking advantage of this non-reporting to tax authorities in fleece, the industry leader expressed doubts about such possibilities.
“I don’t think it’s possible. Also, violating the laws of the land is punishable and as a company we do not condone such behavior,” Matsheza added.
Economist Dr Prosper Chitambara, however, said it was ideal for companies to also report earnings in US dollars to reflect the realistic picture on the ground.
“The main reason for this reluctance, however, could be motivated by the need to maximize profits in a context where the incentives for such declarations are few.
“While some companies do the right thing by reporting their US dollar earnings, it is morally prudent for those that don’t to do the right thing by reporting their foreign currency earnings, as this will go a long way in facilitating the smooth collection of foreign exchange tax revenue,” he said.
Contacted to comment on the matter, the managing director of the Zimbabwe Stock Exchange (ZSE), Justin Bgoni, said only the Board of Public Auditors and Accountants had the authority to push for such changes.
“When reporting, issuers are required to comply with International Financial Reporting Standards (IFRS) and International Standards on Review Engagements (ISRE), as prescribed by the Board of Accountants and auditors (CCPP).
“The guidelines set out in the IFRS, ISRE and PAAB standards meet the transparency required of issuers during reporting.
“The PAAB however has a mandate to establish financial reporting standards in Zimbabwe, which are adhered to by issuers in the ZSE,” he added.
Recently, the Zimbabwe Revenue Authority (ZIMRA) has launched investigations into several companies that avoid sales in US dollars as some report that some are issuing receipts in Zimbabwean dollars even after customers have paid in foreign currency.