Exporters deflate shipments value
There are high chances that Zimbabwean exporters could be deflating the true value of their shipments to circumvent huge exchange losses resulting from a wide disparity of official and foreign exchange rates.
In light of a huge disparity between market exchange rate of 120 to US$ 1 on the parallel market and the official auction exchange rate of 83,37, the 37 percent discrepancy has resulted in massive “retrogresive” taxation on the exporter for every dollar that the Reserve Bank US of Zimbabwe compulsorily liquidate, analysts say.
Last month, the central bank raised the mandatory liquidation threshold on export earnings to 40 from 30 percent, but scrapped the 60-day period exporters are compelled to sell for local currency unused export receipts.
The move, some importers said came “as a total shock to the private sector that should be driving economic growth and is tantamount to killing the goose that lays the golden egg”.
And the country would be “very lucky” to grow exports under such a heavy tax system on exporters.
“This implicit taxation on exporters is retrogresive and only encourages transfer pricing,” economist Brains Muchemwa told Business Weekly.
“These exporters pay for local supplies and most prices are indexed at black market rate so about 40 percent of their income is wiped out. The Government would need to be proactive than reactive because at some they will realise this but it might be too late to salvage the situation.”
Analysts say exporters are taxed at a special concessionary rate of 15 percent which is lower than 25 percent that applies to non-exporters. This special benefit was designed to encourage producers to seek foreign markets for Zimbabwean products and to grow exports.
If, however, other plethora of taxes currently applicable to exporters including 2 percent intermediary money transfer tax on foreign currency transactions, 40 percent mandatory liquidation at 37 percent lower value than market rate and the 15 percent income tax, the effective tax rate become so huge.
Edwin Moyo, chief executive of Nhimbe Fresh Produce, the leading exporter of horticultural produce told Business Weekly that it had become very difficult to export under the current conditions.
“Almost like punishment to those earning foreign currency for the country,” said Moyo, the former owner of Kondozi Estates.
“While it is clear that the country has no foreign currency, this cannot be blamed on exporters, but exchange rate manipulation by the authorities. The honest truth is there is a lot of dollars in US Zimbabwe but in the black market due to lack of confidence in the banking sector created through policy inconsistencies by the monetary authorities.”
Moyo said the monetary authorities seemed to have turned a blind eye to this and instead want “to punish” those genuinely doing business and declaring their exports.
Worst still, the exporters have to incur other transaction costs such as freight, handling and marketing fees all which are paid up front ‘then be punished for the meagre earnings coming back in the country.’
“We know that the motivation for these measures are to fund the auction, but its not sustainable, “said Moyo.
Economic analyst Langton Mabhanga said 40 percent retention on exports’ would obviously be astronomical and obviously makes industry curious on how (if) empirical the quantum was determined.
“The same would raise concerns of how this creates comfort for capital seeking to either continue to reside or be newly invested in the country. Flirting consistency and viable options that are semi permanent would do well at this time when much attention is on launching the 1 to grow the economy and NDS achieving Vision 2030, “said Mabhanga.
He said strategic policy intervention that seeks to balance current forex mobilisation initiatives with growing medium to long term and more sustainable production based exports were critical.