Treasury has announced new measures to enhance usage of the domestic currency (ZWL) to include payment of taxes and duties by exporters in Zimbabwe dollars as authorities attempt to save the local unit of exchange that has been widely ostracized by the local market for its rapid depreciation.
Prior to this, importers of goods in foreign currency were liable to paying taxes and duties in foreign currency.
Zimbabwe’s economy is largely informal and most market players are declining ZWL payments in favor of American dollars which preserve value.
Last week, top executives at the CEO Africa Roundtable urged government to own its local currency and avoid demanding taxes in foreign currency as this was undermining confidence in the Zimbabwe dollar.
In a circular, Finance and Economic Development Minister, Prof. Mthuli Ncube said it was now imperative to expand the areas which the ZWL should be used in the economy.
With immediate effect, all mining royalties will now be payable in ZWL up to a limit of 50% of royalties due.
All duties and taxes on the importation of designated motor vehicles are now payable in ZWL again up to a limit of 50% of duties and taxes payable.
All domestic taxes due from exporters on their receipts will now be payable in both foreign and local currency in direct proportion to the approved export retention levels.
This means that an exporter who receives foreign currency of US$ 1000 AT A 40% surrender ratio (60% retention) will pay taxes on the 40% in ZWL and 60%in foreign currency.
“These measures are aimed at stemming illegal trade in foreign currency and its associate twin, that of parallel market benchmarking or indexation of prices of goods and services at parallel market exchange rates,” said the minister.
Most exporting companies were against taxation in foreign currency on top of having surrendered a portion of their foreign currency earnings to the Central Bank in line with foreign currency retention policy.
The local currency has been rapidly losing ground on the local market both in value and market confidence as most companies were now declining the ZWL payments and even paying wages in USD to preserve value.
This has been necessitated by the growing disparity between parallel and formal market rates which has seen the former trading at ZWL$ 240/USD and the later at ZWL$ 115/USD.
These developments have led to rapid growth of privately held foreign currency reserves from US$ 300 million in 2018 to over US$ 2 billion currently held in Zimbabwean banks.
