FOREIGN currency earners and companies could soon pay enormous amounts in rates and commission for foreign currency transactions following the gazetting of a new statutory instrument defaulting all taxes paid after the introduction of the official interbank foreign exchange rate.
Under Statutory Instrument 135C/2008 gazetted last week, tax remittances paid using the fixed rate of $30 000 against the United States dollar now present a tax exposure or liability to employees and companies to pay more due to the backdating of the piece of legislation to May.
â€œThe rate at which the Zimbabwe dollar may be exchanged for the United States dollar shall be: In the case of the payment by any person of any tax, duty or charge that is denominated in US dollars or in any other foreign currency denominated under the Exchange Control Order, 1996, interbank rate of the day before the day on which the tax, duty or charge must be paid,â€ read the Statutory Instrument.
â€œThis direction shall be deemed to have come into operation on May 1, 2008. In any other case, the interbank rate of exchange prevailing on the day of the transaction concerned. The maximum commission, fee or charge that may be levied on any foreign exchange transaction shall be zero comma five per centum of the total nominal value, expressed in Zimbabwe dollars, of the foreign exchange concerned.â€
Before this law a foreign currency earner who earned US$103 on Monday was eligible for the tax-free bracket of $15 000 using the interbank rate for the day. But the same amount attracted minimum tax charges the next day due to movements on the exchange rate that pegged the amount at about $17 000.
Generally companies remit tax to revenue authorities by the 15th of the month after processing of salaries.
Harare Chamber of Commerce chairman and tax expert, Tendai Mavima said changes in the day of processing income tax and movements on the interbank rate could present cumbersome challenges for companies in calculating tax remittances.
â€˜The statutory instrument seems to legalise the Zimra directive,â€ said Mavima.
â€œBut the challenge is that in terms of the Zimra memorandum the interbank rate is used on the day of processing the payroll. However the statutory instrument refers to the rate on the day before day of payment â€” there is need for clarity on that.â€
Law experts said this new development could trigger a streak of constitutional challenges after if emerges that initial compliance with the Zimra directive is in â€œdefaultâ€ with the law.
Analysts also criticised government for bungling income tax management policies saying the Statutory Instrument was also laden with â€œdrafting errorsâ€.
Â This law analysts said was published well after revaluation of currency in August, which makes the new exchange rate used for government departments and parastatals questionable.
Before gazetting of this new law, some companies were challenging the Zimra directive on tax remittances for lacking a legal footing to make it enforceable.
By Bernard MpofuÂ