ZIMRA tightens screws on tax audits amid spike in tax fraud

ZIMBABWE Revenue Authority (ZIMRA) says it will wield the axe on businesses selling goods and services in US dollars but receipting the money in Zimbabwean dollars, prejudicing Treasury of millions of US dollars.

Government noted that while deposits in local foreign currency accounts were going up, tax payments to ZIMRA remained stagnant.

ZIMRA Commissioner General Faith Mazani told the media during a Virtual Press Conference on Thursday that tax audits focused on monitoring of tax payments in foreign currency are currently ongoing with any detected non-compliant sectors facing sanctions.

The sanctions include charging of penalties, prosecution, naming and shaming non-compliant sectors.

Businesses have been trading using the dual pricing system since June 17 2020, when the Reserve Bank Governor announced the dual pricing system.

The announcement was followed by the gazetting of Statutory Instrument 185 of 2020 as the Exchange Control (Exclusive Use of Zimbabwe Dollar for Domestic Transactions) (Amendment) Regulations, 2020 (No. 3).

Statutory Instrument 185 of 2020 was aligned with the provisions of Section 4A of the Finance Act which requires that tax be paid in the currency of transaction.

However, an unsubstantiated amount of US dollars is not being banked, while operators are receiving foreign currency from their customers and issuing them RTGS receipts, among other forms of malpractices.

“In line with SI 185 of 2020, ZIMRA issued a Public Notice No. 40 of 2020 addressing certain business malpractices,” Mazani said.

“Among the observations made, ZIMRA noted that: 1. Some businesses are not recording transactions being tendered for in foreign currency. 2. Where transactions have been recorded, part or all the foreign currency tendered is not being declared for tax purposes.”

“3. Transactions in foreign currency are being written in manual registers. 4. Operators are receiving foreign currency from their customers and issuing them RTGS receipts. 5. Foreign currency tendered is not being banked.

6. Parallel manual invoicing is being used for recording transactions involving foreign currency, and such invoices are not declared for tax purposes. 7. There are stand-alone tills, which are not configured to the ZIMRA fiscalisation system.

She continued: “8. Some traders have created back offices and banking halls where forex payments are being received but not receipted nor declared on returns. 9. Offline separate systems are being kept for transactions involving foreign currency.”

ZIMRA said some of the practices above are a direct violation of the provisions of section 4A of the Finance Act and section 38 (6) of the VAT Act.

“We have therefore gathered today to emphasize on the need for business to ensure that in all instances documents recording sales (Invoices, Tax Invoices, Till Slips, Receipts or other documents recording sales) are issued to the customers,” Mazani said.

“Fiscalised registered operators are required to produce fiscalised documents. Where a sale is made in Zimbabwe dollars, the invoices/till slips/receipts recording the sale must be issued in Zimbabwe dollars,” she added.

Where a sale is made in foreign currency, the invoices/till slips/receipts recording the sale must be issued in foreign currency. Where a sale is made in parts of Zimbabwe dollars and foreign currency the invoices/till slips/receipts must reflect such currency details.”

On areas of non-compliance, Mazani urged Zimbabweans to come forward and make voluntary disclosures.

“ZIMRA further encourages members of the public to insist on being issued invoices, tax invoices, receipts for business transactions done reflecting the correct currency of transaction,” she said.

“Where sellers issue discounts to their customers in either ZWL$ or foreign currency, they must issue credit and or debit notes to correctly record the changes in currency of trade. Report any act that contravenes the Tax provisions. Utilize our whistle blowing facility where the identity of the informer is kept in strict confidentiality,” Mazani added.

This comes at a time government has been battling to raise revenue to finance critical national needs in the wake a shrinking revenue base.

Reserve Bank of Zimbabwe Governor John Mangudya said a number of businesses were cheating Government by failure to declare  transactions conducted in foreign currency.

“We have seen an increase in domestic foreign currency accounts  deposits but we are not seeing the same increase in the revenue being  collected by Zimra. We also know that some of the businesses are not  even banking the cash that they are getting,” he said.