Public notice 4 of 2020 which was published in local print newspapers and is yet to be made available on the ZIMRA website the entity made a request for entities operating in foreign currency to remit taxes to ZIMRA in foreign currency. This expressly includes situations where pricing is done in foreign currency. The taxes specifically.mentioned in the public notice are income Tax, Pay as You Earn (PAYE), Value added tax (VAT), Capital Gains Tax (CGT) and mining royalties.
Businesses have been getting approval from the Reserve Bank of Zimbabwe to operate in foreign currency. Many in tourism are granted this privilege for obvious reasons. Recently Freda Rebecca gold mine and the National Railways of Zimbabwe sought approval for foreign currency and were granted it
Freda Rebecca gold mine has acquired approval to pay its workers in US dollars as evidenced by an internal memo from the general manager to all workers confirming that Freda Rebecca will be paying their salaries in US dollars between January 2020 and December 2020.
THE Reserve Bank of Zimbabwe has granted the National Railways of Zimbabwe permission to charge in foreign currency for goods exported under the Cost, Insurance and Freight (CIF) conditions.“The intervention by the Central Bank is critical for NRZ considering that foreign currency has been essential in funding the organisation in hiring wagons and locomotives from the region to address resource and capacity gaps, hire inter-change, as well as procuring spares and accessories for wagons, locomotives and infrastructure maintenance. And at this juncture, the need for foreign currency for the organisation has become huge and urgent especially to hire locomotives and wagons for the movement of imported grains, to alleviate drought-induced shortfalls, among communities in Zimbabwe,” NRZ board chairman Advocate Martin Dinha said.
It seems like a bad joke now but it really is becoming more and more evident that move to return the Zimbabwean dollar and then make it sole legal tender was not only premature but ridiculously ill-advised. The government itself, through ZIMRA wants foreign currency but continues to bar the nation at large from using it.
This, of course, hasn’t stopped people from pricing and operating in foreign currencies mainly the US dollar. We’ve discussed many times how the US dollar is still the real value unit of the nation of Zimbabwe. Action on the street shows that, true to economics theory, that will not change unless and until it is easier or more beneficial to use the local currency.
As much as common sense and the governments own actions show that a return to dollarisation (via any stable currency) is what the economy needs there are reasons the status quo is favourable to the government. Paying off debts, which our government has many of, with foreign currency is easier. After the Supreme court ruling put to rest the question of pre-February 2009 US dollar debts, a debtor receiving US dollars can liquidate them to pay the debts in Zimbabwean dollars. The governments pre February 2019 domestic debt of US$9 billion is payable with ZWL$9 billion which is US$521 at the interbank rate and US$365 million at the reported parallel market rate.
At some point, the government shall have to admit that it is not working. Don’t expect that to be soon as they are busy liquidating the US dollar debts incurred before February 2019.