THE government is cracking down on pharmacies that are selling products in foreign currency, but remitting taxes in the Zimbabwean dollar.
Unlike Value Added Tax, whose credit and refund mechanism does offer unique opportunities for abuse, other taxes are open to evasion and fraud, which has recently become a major concern in Zimbabwe.
A survey by the Zimbabwe Independent around Harare and other major cities has revealed that some pharmacies have been charging in foreign currency, but issuing receipts denominated in the Zimbabwean dollar.
The situation has been further complicated by the fact that pharmacies are still pricing drugs at a rate of between ZW$100 and ZW$120 to the United States dollar against the auction rate, which this week stands at ZW$83,32. The clampdown, sources in the sector and in government said, might see errant pharmacies being arrested and facing lengthy custodial sentences as is the norm the world over.
A well-placed source at the Treasury said big pharmaceutical wholesalers have been getting foreign currency at the auction but are selling the drugs at a higher rate.
“The pharmaceutical industry is being dealt with after the Treasury was made aware that most pharmacies have been charging in foreign currency and then issue receipts in local currency and eventually remitting taxes in local currency.
“These shenanigans have prejudiced the government of millions of dollars. To make matters worse, the same pharmaceutical industry getting foreign currency at the auction is the same industry now selling their products using the black market rate. There is need for sanity there,” the source said.
Pharmaceutical Retailers Association president Josephine Chinobva, however, said she could not comment on the issue since it was individual specific.
“The industry is made up of small players hence it is difficult to know the books of individual players,” she said.
Zimbabwe Revenue Authority (Zimra) spokesperson Francis Chimanda asked for written questions which had not been responded to by the time of going to print.
However in a joint statement on August 20, Zimra and the Reserve Bank of Zimbabwe warned businesses transacting in foreign currency but not remitting taxes in forex that they face heavy censure if caught.
Zimbabwe, which for over a year had officially been using a mono-currency for trading, in June this year allowed businesses to dually price their goods and services in local currency and in foreign currency, primarily the United States dollar.
Since then there has been an increase in foreign currency transactions across the country, including in rural areas.
There are cases where some proprietors are even declining local dollars.
However, many businesses have either been under-stating the foreign currency transactions or outrightly cheating the government by not declaring the forex transactions.
The economy has been going through turbulent times of late, notwithstanding the fact that government has put in place a raft of measures and interventions to spur economic growth.