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- The Zimbabwean government is allowing mining companies and some importers to pay taxes in the local currency.
- Previously, they have had to pay these taxes in US dollars and other foreign currencies.
- The official rate of the Zim dollar to the US dollar is nearly half what it is worth in the local trade.
Zimbabwe will allow mining companies to pay mineral royalties in the local currency and tax exporters as well as importers of vehicles in its floundering domestic currency.
The new tax regime takes effect immediately and forms part of Finance Minister Mthuli Ncube’s new mechanisms to support the Zimbabwe dollar.
Previously, miners - including units of Implats and Anglo Platinum - have been paying royalties and other taxes in foreign currency.
Importers of vehicles into Zimbabwe have also been paying for duty in foreign currency, with the government arguing that since the vehicles are bought in hard currency, import duties also had to be in US dollars.
Other exporters who had the additional burden of surrendering 40% of their hard currency earnings for conversion into local currency using the official exchange rate have also received a reprieve.
In a public advisory note dated 4 February, Ncube said: "All mining royalties are now payable in Zimbabwe dollars up to a limit of 50% of royalties due. All domestic taxes due from exporters on the export receipts are now payable in both foreign currency and local currency."
Under the new arrangement, an exporter who receives foreign currency at a 40% surrender ratio will pay taxes on the 40% in Zimbabwe dollars and the 60% in foreign currency.
"All duties and taxes on the importation of designated motor vehicles are now payable in Zimbabwe dollars up to a limit of 50% of duties and taxes payable," added Ncube.
While the Zimbabwe government has been pushing for the increased usage of the Zimdollar against its continued streak in losing value, the government has also been collecting fees in foreign currency. This further eroded confidence in the local currency.
Zimbabwean companies have been struggling to raise foreign currency to retool and expand production, prompting Ncube to give incentives for the duty-free importation of some critical raw materials.
With the government insisting on foreign currency allocations through the official forex market and on usage of the Zimdollar for domestic purposes, a street market has emerged for the US dollar in Zimbabwe.
Some companies that face delays in getting foreign currency disbursements from the Reserve Bank of Zimbabwe have often resorted to the parallel market which is nearly double the official exchange rate of 1:115.
The Confederation of Zimbabwe Industries is advocating for short settlement window in terms of the time-frame that it takes to allocate companies foreign currency bids at the weekly auction for dollars.
The CZI also wants the government to auction only available foreign currency and not to "accumulate any backlog".
The government should also "provide better pricing signals to the markets" and "gravitate towards convergence" of the exchange rate regime in Zimbabwe, added CZI.
