Operating in a multicurrency environment is a hectic experience, fiscal and monetary policy measures keep getting revised and improved in a bid to stabilize the economy. The need for the policy maker to keep engaging with its citizens is also exasperated when the economy is charactersised by hyperinflation. During the preceding two months, we have seen the government working tirelessly putting in place measures to stabilize the economy. Key to the measures was the promotion of use of local currency. On the 23rd of June 2023 we saw a drift rules of payment of taxes in foreign currency through a press statement titled, “Promotion of use of local currency in the economy – Payment of taxes in Zimbabwean Dollars”.
To promote the use of the Zimbabwean dollar, the Ministry of Finance and Economic Development stated that corporate tax payments will be paid in local currency. According to the Treasury, the government noticed that recent policy actions targeted at stabilizing the economy resulted in better currency stability and overall pricing of goods and services. To encourage the usage of the Zimbabwean dollar, the Ministry announced that for the June 2023 Quarterly Payment Date, taxpayers will be expected to settle 50% of the foreign currency part of their business tax obligations in local currency. However, where the law allows it, taxpayers must satisfy their tax liabilities entirely in local currency. The government will not accept foreign currency payments for the proportion of corporate income tax owed in local currency and other taxes payable in local currency. Corporates were also strongly prohibited from engaging in parallel market transactions for tax payments as this would attract standard penalties. Taxpayers were also warned on late payments as this will attract vigorous penalties. The government is committed to pursuing further currency reforms in order to promote long-term price stability. Taxpayers who do not have enough Zimbabwe dollars to meet their local currency tax obligations ware encouraged to contact the Reserve Bank of Zimbabwe through their banks to arrange for the sale of their United States Dollars holdings to obtain the necessary Zimbabwe dollars. Lastly, the Minister stated in the press statement that the Government is committed to continuing the currency reforms that have enabled the economy to be competitive and will continue to fine-tune the foreign currency markets in order to achieve lasting price stability.
The press statement was presented late, and some tax-compliant taxpayers had already paid for their QPDs. Companies are concerned about their standing, especially at what would be the consequences if the public statement is to be later promulgated into a statutory instrument with a retrospective application. Another key question is whether the press statement is legally enforceable on taxpayers in its current state? Public announcements attempt to provide rules, instructions, and recommendations on tax payment. Without a statutory instrument on the matter, the announcement remains such at law. However, taxpayers must be cautious when deciding the extend to which they can choose noncompliance with the press statement. There are chances of the press statement being promulgated as a statutory instrument with retrospective application. One can allude that the government has been kind and patient enough to taxpayers as they could have straight away made the clauses binding law not taking into cognisance the impacts of the provisions to the taxpayers’ businesses.
The public statement further alludes to the need for taxpayers to approach the Reserve bank should they have inadequate Zimbabwe dollars to meet their tax obligations. A reminder is also given through the same public statement for taxpayers to desist from engaging in parallel market transactions. Though this may appear as if the central bank has merely abandoned the provisions of section 37AA and has relegated its responsibility to the tax paying community in a bid to promote the use of ours; the Zimbabwean currency it is important to realise that the government is attempting to do good, and without the taxpayers’ help, this would be impossible. The Zimbabwean currency has recently gained value as a result of such reforms thus a good cause.
Zimbabwe’s tax landscape, like that of any other developing country, is riddled with loopholes here and there. However, the taxman and the government are working hard to close the loopholes. Just like any other developing country the Zimbabwe tax landscape continues to be characterized with loopholes here and there. However, the taxman and the government are doing their best to amend the gaps. Section 37AA brought about complexity in payment of taxes in foreign currency. Most taxpayers are yet to fully grasp the dictionary of section 37AA and plan their tax affairs accordingly and to a greater extent the taxman has tried to be lenient. A call for a new provision changing the same subject of tax payment in foreign currency will sting even more because it will pile another unresolved concern on top of another. However, lawmakers are without a doubt reasonable people, and if any critical problems develop as a result of the provision, the lawmaker will give reasonable answers through their officials, as they have always done.
In conclusion, operating in a multicurrency calls for agility in adopting expected changes to the environment and that is why the government has made efforts to stabilize the economy. While the press statements with measures to stabilize the economy may have appeared numerous, they have proved to be necessary pieces as evidenced by the narrowed margin between the official and parallel rate of exchange. Before we jump to conclusions and say too much, let us accept the announcement as a guide for what is to come and completely prepare ourselves so that when the time comes, we are all ready to embark.