Treasury has granted authority for taxpayers to settle their obligations in Zimbabwe Gold (ZiG) and foreign currency on a 50-50 basis, while maintaining the legal provisions for economic agents to pay their taxes in the currency of trade.
The Ministry of Finance, Economic Development and Investment Promotion said it was still working on a comprehensive plan for a seamless transition from exclusive payment of taxes in the currency of trade to the domestic unit of account.
Further, Treasury emphasised that the strategy to guide the currency transition for tax payments required legal provisions to be realigned, given that the currency of trade is specified in the principal approved legislation.
The Finance Ministry will also need to set the current ratios of transactions in local and foreign currency as well as minimise the economic shocks associated with abrupt policy changes.
Presently, the payment of Corporate Income Tax is guided by the provisions of Section 4A of the Finance Act (Chapter 23:04), which provides for the settlement of tax obligations in the equivalent proportion of the currency of trade.
Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, said in a statement yesterday that if, for example, a company transacted exclusively in local currency, tax should accordingly be paid in local currency (ZiG).
"Similarly, where a corporation transacts in the ratio of 60:40, that is local and foreign currency, respectively, Corporate Income Tax should accordingly be accounted for in the same ratio.
"However, notwithstanding the current legislative provisions, Treasury authority is hereby granted for corporates to account for the 2024 Second Quarter Corporate Income Tax obligations in both local and foreign currency on a 50-50 basis," he said.
The minister also noted that the economy had demonstrated relative stability since the presentation of the Monetary Policy Statement (MPS) by the Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu on April 5, 2024.
The country had successfully transitioned from the Zimbabwe dollar to the more stable Zimbabwe Gold (ZiG).
Minister Ncube advised corporates that had already paid their second quarter tax obligations in accordance with current legal provisions that tax authorities had been directed to handle such transactions on an administrative basis, as provided for by the law.
In a correspondence to the Zimbabwe Revenue Authority (Zimra) commissioner general, Secretary for Finance, Economic Development and Investment Promotion Mr George Guvamatanga said, "Corporate Income Tax payments for the Second Quarter that have already been made in accordance with the currency legal provisions should be treated as having fully complied.
"Similarly, corporates that opt to continue with the current legislative provisions should also be treated as having fulfilled the
tax obligations."
According to Minister Ncube, businesses and the public had the option to pay fees and charges due to the Government in local currency.
"Additionally, customs duty on imported goods is payable in local currency, except for designated foreign currency dutiable non-essential or luxury goods," the minister said.
Minister Ncube said that as part of a comprehensive review of the Framework of Tax Payments, the Treasury would in due course specify the taxes which will exclusively be payable in local currency and the necessary supportive legislation, with the approval of Parliament.
He said that the Government was pleased with the wide acceptance of the ZiG by economic agents and the general public.
The ZiG is backed by a basket of precious metals, mainly gold, and foreign currency reserves, with a combined value of about US$300 million.
Dr Mushavanhu said during the presentation of the MPS that there was US$80 million worth of ZiG in circulation in the market.
He had indicated earlier the central bank would lobby the Treasury to provide for payment of 50 percent of quarterly payment dates (QPD) taxes exclusively in ZiG, to strengthen the new currency.
Minister Ncube said that given the need to maintain the positive economic trajectory, "Treasury is stepping up to complement the Fiscal and Monetary Policy Framework aimed at further anchoring the currency, exchange rate and price stability."
Minister Ncube's latest announcement has been applauded by economists, who said it was the right policy direction as the country sought to grow market confidence in the new currency.
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Economist Dr Prosper Chitambara said the move to encourage 50 percent foreign currency and the same portion of local currency underpins the efforts being made to prop up the local currency.
"It is in line with the Government's thrust of trying to stabilise and sustain the value of the ZiG in the long term. So, I think it is a positive development, which obviously will create that strong demand for the ZiG, which in itself is also critical in terms of sustaining the value of the new currency," he said.
Economist Gladys Shumbambiri-Mutsopotsi believes the move will help the local currency and have a positive impact on the economy.
"By allowing taxes to be paid in ZiG, the Government can increase its revenue and reduce its reliance on foreign currency. This move can simplify tax compliance for businesses and individuals, reducing the administrative burden of converting currencies," she said.
According to Ms Shumbambiri-Mutsopotsi, paying taxes in ZiG can increase demand for the local currency, potentially boosting its value, as earlier pronounced by the central bank governor.
