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Some taxes payable in USD now payable in ZWL – Good idea that won’t work

Mthuli Ncube Budget 2022

Finally the Zimbabwean government, the Minister of Finance Mthuli Ncube particularly acknowledges its double standards (somewhat). The minister has shared a document on Twitter titled, “Measures being instituted by government to enhance the domestic use of the Zimbabwe dollar.”

The important bit goes so:

a. All mining royalties are now payable in Zimbabwe Dollars up to a limit of 50% of royalties due.

b. All duties and taxes on the importation of designated motor vehicles are now payable in Zimbabwe dollars again up to a limit of 50% of duties and taxes payable.

C. All domestic taxes due from exporters on their export receipts are now payable in both foreign and local currency in direct proportion to the approved export retention levels. As an example, an exporter who receives foreign currency of say USD1 000.00 at a 40% surrender ratio (60% retention) will pay taxes on the 40% in Zimbabwe dollars and the 60% in foreign currency.

These measures reflect Government’s commitment to promote the wider use of the Zimbabwe Dollar and to continuously strengthen the economy so as to build long-lasting macro-economic stability.

What problem are they trying to solve by the way?

Well, the Zimbabwean Dollar has been falling at an unbelievable pace. The major underlying reason why this has been happening is that no one really wants the currency. Zimbabweans don’t believe this currency is a good store of value which in itself is a self fulfilling prophecy.

Once people believe that, they will reject the currency and want to convert it to one that they trust. By doing that, they are willing to purchase the more stable currency (the USD) at whatever cost meaning the value of the Zim dollar goes down as more and more people and businesses compete to get the USD.

When people and businesses observe that loss of value they are moved to mistrust the local currency more and they double their efforts in trying to get rid of it which devalues the currency even further and the circle keeps going in that fashion. The situation gets worse with every turn of the circle. If Mthuli Ncube and John Mangudya would speak honestly they would tell you this is where we find ourselves as a country.

Why are Mthuli’s measures a good idea?

The government itself was part of the bandwagon that has been refusing the Zim dollar even while they tell the rest of us to use it. A lot of taxes and fees are only payable in foreign currency. Now, if I can’t even pay the government in its own issued currency why should I expect anyone else to accept it?

What has been happening therefore is that there has been less and less usage of the Zim dollar. The average person probably only uses local currency when buying airtime and paying ZESA otherwise nearly everything else is priced in USD. To be honest even for airtime and ZESA some traders are selling in USD besides Techzim and others of course.

By demanding that taxes be paid in local currency the government may stabilise things by creating a use for the currency. Just like people keep a bit of their money in local currency in order to buy ZESA on Techzim, businesses and individuals affected by the taxes listed above will keep a bit more in order to meet their obligations to the government. This will increase the demand of the local currency and therefore reverse the downward spiral; at least that’s the hope.

Why will it not work?

These efforts will probably not work because we are too far down the tubes now. Damage has already been done. Public perception on local money is already hostile and it will not change just like that. In fact, the public is justified in not trusting any money issued by the Zimbabwean government because the government has robbed people countless times through monetary policy.

Second reason this will not work is because this is a half measure. Not all the previously USD payable taxes are now payable in ZWL. Ncube’s statement talks of 50% here, 60% there and such. There are other fees that are still wholly payable in USD only for example fees for the new e-passports. The government is therefore still rejecting its own currency and why should people not do the same?


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17 thoughts on “Some taxes payable in USD now payable in ZWL – Good idea that won’t work

      1. I mean to Mthuli, not youđŸ˜©. I guess I’m in a financial crisis that’s why I am like this

        1. Ndanga ndatya…
          I know how things are hey. It’s painful to keep going through the same cycles and becoming poorer at every turn

  1. So government should make all taxes payable in zwl at some percentage, that might slow down the downward spiral.

    1. Theoretically it must work but I think it won’t really work because the mistrust in the currency is just too high. And we can’t really blame people for having such levels of mistrust

  2. As long as the government shows its own lack of confidence in the local currency by accepting payments in forex. The zim $ is going to suffer a slow but inevitable death, even this move reducing forex content of payments is just a desperate move to slow down the demise of the zim $.
    The rigged auction rate means that the local currency equivalent collected will result in a drop in revenue to govt.
    By reducing the amount paid in forex it means that the exchange rate shoot up faster because the govt (RBZ) will definitely put more effort into buying forex on blackmarket. This is a fact there is no need to deny it after all those brand new bricks of local currency have to be coming from somewhere.

    1. Ndopane musoro wenyaya. MONEY PRINTING! Nothing else. The govt spends more than they collect so they print more. Infact they are aware of this and accept the consequences. Only that they cannot accept publicly.
      This policy promises to reduce pressure on the parallel market; for the US$ that is. Infact ibdviduals and cos will seek to change the US$ for local $ to pay taxes However it does not solve the problem if the money printer is not shutdown.

  3. This will further fuel the parallel market. Will be zim dollar component rate be fixed or follow the prevailing rate? Your guess is as good as mine. In 2008 we used to ‘burn’ money to buy fixed priced goods.

  4. Y does the RBZ keep accepting inflated prices on the auction. If the lowest is 100 and the highest is 130. How is it that the bidder can put such an inflated rate? Surely that is leading to the price increases.

    Investigate inflated bids

  5. It’s the height of madness – you are a ZIMBABWEAN getting a ZIMBABWEAN PASSPORT in ZIMBABWE and then they say pay for it with UNITED STATES of AMERICA DOLLARS but we supposedly have a currency of our own??? This govt is really full of it – we are sick of their threats and crackdowns – accept YOUR OWN currency before trying to force it on anybody else – SIMPLE!

  6. The lack of trust in the currency is in direct proportion to the mistrust of all the politicans at the helm of the govt churning out these policies bereft of knowledge and wisdom generously peppered with fraudulent activities. Add up all the money stolen by this junta and all its enablers from 1980, you’ll understand why people who can’t even go to the toilet unassisted are not resigning.

  7. This may work, I hope it works, if not for anything but for our country’s and the next generations’ sake. Ever wondered why people queue at banks to withdraw the Zim Dollar? It still has it’s uses and with the use-cases expanding, its demand may just increase.

    I believe the narrative of the Zim situation needs to change. Noone, noone prophesizes/sees a land of milk and honey when looking at Zim. How then do we get to that promised land if all we see is gloom and doom? Take time to read through the articles, comments and conversations and you’ll see a self-fulfilling cycle of not believing in the present or future or success of anything at all. Let’s be careful and question whose sentiments we echo at the base of it.

    1. I agree with you that theoretically this is a sound idea. I also agree with you that we all want prosperity for our country.

      However, the last 25 years have shown us how inconsistent our government is. I don’t think that factoring this into an assessment of whether good theoretical policies will succeed is negative. It’s being prudent.

      Already the inconsistency is showing. The government is now paying it’s workers USD. Where will the money come from especially after they have announced the measures in this article? Will this not result in further printing or raiding of accounts? This has happened several times before hasn’t it?

  8. @Anonymous chakatanga ndochakachenjedza. We have had lots of programs that sounded good for the nation but ultimately they failed because of reasons we are all aware of.
    One only has to take advantage and pay the taxes in the $zwl/rtgs and hopefully the process wont be tiring lest you endup paying in $us. and hopefully the ‘some taxes’ will encompass everyday meaningful goods.

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