Business
Increased forex retention level spurs Zimdollar liquidity: IH – NewsDay
IH Securities said there was a marked growth in Zimdollar liquidity in the market that it expected would continue into the final quarter of the year, exerting persistent pressure on the exchange rates.
RESEARCH firm Inter Horizon (IH) Securities says the move by the government to standardise foreign currency retention at 75% across all sectors of the economy will improve the Zimbabwean dollar liquidity.
Last month, the central bank standardised the export retention threshold for exporters at 75% from 85% for some exporters.
In its latest monthly market snapshot for October, IH Securities said this measure would also aid in increasing foreign currency resources required to settle the country’s financial obligations.
“As a result of softening mineral prices, the country’s export receipts fell by 9% over the nine months to September 2023 from US$4,5 billion during the comparable period in 2022 to US$3,6 billion,” IH Securities said.
“In consideration of this, one of the key changes passed with effect from 1 November 2023, is that foreign currency retentions on exports will be going forward and be standardised at the level of 75% across all sectors of the economy, and all special dispensations granted to some sectors of the economy removed.”
The research firm added: “The net effect of this measure is to increase foreign exchange resources available to the bank and government to meet foreign exchange requirements for the settlement of national and international obligations.
“In our view, this inadvertently increases the ZWL (Zimbabwe dollar) burden required to liquidate the remaining 25% of foreign currency and potentially implies increased Zimdollar liquidity in the economy.”
Some exporters were enjoying a higher export retention threshold, putting less pressure on the need to find local currency to liquidate the remaining balance of the export proceeds.
However, now that all exporters are set to receive a standardised rate, this increases the need for more local currency to liquidate the remaining foreign currency.
IH Securities said there was a marked growth in Zimdollar liquidity in the market that it expected would continue into the final quarter of the year, exerting persistent pressure on the exchange rates.
The increase in Zimbabwe dollar liquidity is being blamed on the proposed national budget of ZW$47,8 trillion for 2024, an increase of over 900% from the current fiscal year.
The move to standardise the export retention threshold comes as local banks had all but stopped lending in foreign currency due to uncertainty over whether the usage of foreign currency would continue post 2025.
The government has since extended the usage of foreign currency to 2030.
However, miners, the largest export bloc in the economy, have seen a 30% decline in foreign currency retention over the past 12 months due to increased costs relating to power usage, fuel and supplier charges.
“Survey findings show that in general, the amount of foreign exchange retained by mining companies has declined by more than 30% over the past 12 months,” Chamber of Mines of Zimbabwe (CoMZ) said in its latest report.
“The decline is largely on the back of falling mineral earnings (due to softening prices) and rapid dollarisation of the economy.
“Analysis of survey data show that the effective retention (rate) is now around 45%, compared to the 75% announced by RBZ (Reserve Bank of Zimbabwe).
‘The PGMs (platinum group of metals) and lithium sectors are the most affected with the PGMs sector’s amount of foreign currency retained mining companies coming down from as high as US$1,5 billion in 2022, to around US$1 billion for 2023.”
The CoMZ said PGM producers reported that the available foreign currency was now acutely inadequate to meet their operational requirements including funding of expansion and beneficiation projects.
According to survey respondents, several factors were leading to miners experiencing 45% retention thresholds that include payment of electricity wholly in foreign currency and suppliers demanding strictly forex in the delivery of goods and services.
Further, miners complained that the increased royalties on lithium and platinum in foreign currency were also leading to reduced retention thresholds.
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Business
Mthuli squeezes consumers, businesses – NewsDay
In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.
GOVERNMENT yesterday announced a cocktail of tax increases, pushing up the cost of living and ease of doing business after reviewing its 2024 revenue projection upwards by 22,22% to ZWL$53,9 trillion.
In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.
Treasury initially projected revenue collections to total ZWL$44,1 trillion for the 2024 fiscal year.
“Mr Speaker Sir, in line with the projected economic growth of 3,5%, total revenue collections in 2024 are estimated at ZWL$53,9 trillion, (18,3% of GDP), broken down as ZWL$51,2 trillion tax revenue and ZWL$2,7 trillion non-tax revenue,” Ncube said.
“Guided by the expected revenue envelope and the desired fiscal path, expenditures in 2024 are projected at ZWL$58,2 trillion (19,8% of GDP).”
Ncube announced an upward review on the Strategic Reserve Levy by US$0,03 and US$0,05 per litre of diesel and petrol, respectively, with effect from January 1, 2024, pushing up the cost of fuel.
Ncube also raised tollgate and passport fees beginning next year.
“I, therefore, propose an upward review of toll fees on premium roads, that is, Harare-Beitbridge and Plumtree-Mutare and other roads, with effect from January 1, 2024. Revenue derived from the increased fees will be remitted to the Consolidated Revenue Fund,” Ncube said.
“I, further, propose that passport and selected fees charged by the Central Vehicle Registry be increased, with effect from January 1, 2024. Additional revenue generated from the above measures will be ring-fenced towards road infrastructure development.”
Ncube also introduced a US$0,02 levy per gramme of sugar contained in beverages, a development that will push up the prices of beverages.
He said the move was in response to growing concerns on the adverse effects of the consumption of sugar contained in beverages. Tax on beverages has also been implemented in a number of countries, including in the Southern African Development Community.
Ncube also introduced a new wealth tax to ensure that high-income earners pay taxes.
“In order to ensure that every person contributes to the fiscus in line with their levels of income. I propose to introduce a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000,” he said.
“Resources derived from the levy will be ring-fenced towards urban infrastructure development, in particular roads, water, sewer and community health centres. Principal private residential properties owned by elderly persons above 70 years will, however, be exempt from the tax.”
While the minister reviewed the tax-free threshold on incomes to ZWL$750 000, from the previous ZWL$500 000, inflation has rendered the move mute because of the rising cost of living.
Ncube also targeted foreign companies by introducing the domestic minimum top-up tax (DMTT).
The tax ensures that qualifying entities located in Zimbabwe with an aggregate effective tax rate below 15% be charged a top-up amount, raising the cost of doing business.
“Under the GloBE Tax Rules, where a tax incentive results in an effective rate of less than 15%, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15% (the top-up tax),” Ncube said.
“The DMTT allows the country where the low tax profits arise from the tax incentive to collect the top-up tax rather than ceding taxing rights to the headquarter jurisdiction.”
He said the calculation of the DMTT would be based on the effective tax rate charged on the jurisdictional profits, not the jurisdictions’ statutory corporate income tax.
“I, therefore, propose to enact DMTT rules to guard against ceding taxing rights to foreign jurisdictions on top-up tax arising from tax incentives that are provided to those investments,” Ncube said. The corporate tax rate was also reviewed upwards to 25% from 24%.
Ncube, however, reduced the mandatory value added tax (Vat) registration threshold to US$25 000 from US$40 000, starting next year.
Operators with a minimum annual turnover of US$25 000, or local currency equivalent thereof, are now required to register for Vat.
Failure to register will see applicable penalties invoked, Ncube said.
He said traders registered for Vat purposes and in possession of valid tax clearance certificates would be eligible to procure goods from manufacturers.
“The tax deferred will, however, be fixed at the foreign currency amount payable at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of payment.”
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Business
Mthuli squeezes consumers, businesses – NewsDay
In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.
GOVERNMENT yesterday announced a cocktail of tax increases, pushing up the cost of living and ease of doing business after reviewing its 2024 revenue projection upwards by 22,22% to ZWL$53,9 trillion.
In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.
Treasury initially projected revenue collections to total ZWL$44,1 trillion for the 2024 fiscal year.
“Mr Speaker Sir, in line with the projected economic growth of 3,5%, total revenue collections in 2024 are estimated at ZWL$53,9 trillion, (18,3% of GDP), broken down as ZWL$51,2 trillion tax revenue and ZWL$2,7 trillion non-tax revenue,” Ncube said.
“Guided by the expected revenue envelope and the desired fiscal path, expenditures in 2024 are projected at ZWL$58,2 trillion (19,8% of GDP).”
Ncube announced an upward review on the Strategic Reserve Levy by US$0,03 and US$0,05 per litre of diesel and petrol, respectively, with effect from January 1, 2024, pushing up the cost of fuel.
Ncube also raised tollgate and passport fees beginning next year.
“I, therefore, propose an upward review of toll fees on premium roads, that is, Harare-Beitbridge and Plumtree-Mutare and other roads, with effect from January 1, 2024. Revenue derived from the increased fees will be remitted to the Consolidated Revenue Fund,” Ncube said.
“I, further, propose that passport and selected fees charged by the Central Vehicle Registry be increased, with effect from January 1, 2024. Additional revenue generated from the above measures will be ring-fenced towards road infrastructure development.”
Ncube also introduced a US$0,02 levy per gramme of sugar contained in beverages, a development that will push up the prices of beverages.
He said the move was in response to growing concerns on the adverse effects of the consumption of sugar contained in beverages. Tax on beverages has also been implemented in a number of countries, including in the Southern African Development Community.
Ncube also introduced a new wealth tax to ensure that high-income earners pay taxes.
“In order to ensure that every person contributes to the fiscus in line with their levels of income. I propose to introduce a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000,” he said.
“Resources derived from the levy will be ring-fenced towards urban infrastructure development, in particular roads, water, sewer and community health centres. Principal private residential properties owned by elderly persons above 70 years will, however, be exempt from the tax.”
While the minister reviewed the tax-free threshold on incomes to ZWL$750 000, from the previous ZWL$500 000, inflation has rendered the move mute because of the rising cost of living.
Ncube also targeted foreign companies by introducing the domestic minimum top-up tax (DMTT).
The tax ensures that qualifying entities located in Zimbabwe with an aggregate effective tax rate below 15% be charged a top-up amount, raising the cost of doing business.
“Under the GloBE Tax Rules, where a tax incentive results in an effective rate of less than 15%, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15% (the top-up tax),” Ncube said.
“The DMTT allows the country where the low tax profits arise from the tax incentive to collect the top-up tax rather than ceding taxing rights to the headquarter jurisdiction.”
He said the calculation of the DMTT would be based on the effective tax rate charged on the jurisdictional profits, not the jurisdictions’ statutory corporate income tax.
“I, therefore, propose to enact DMTT rules to guard against ceding taxing rights to foreign jurisdictions on top-up tax arising from tax incentives that are provided to those investments,” Ncube said. The corporate tax rate was also reviewed upwards to 25% from 24%.
Ncube, however, reduced the mandatory value added tax (Vat) registration threshold to US$25 000 from US$40 000, starting next year.
Operators with a minimum annual turnover of US$25 000, or local currency equivalent thereof, are now required to register for Vat.
Failure to register will see applicable penalties invoked, Ncube said.
He said traders registered for Vat purposes and in possession of valid tax clearance certificates would be eligible to procure goods from manufacturers.
“The tax deferred will, however, be fixed at the foreign currency amount payable at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of payment.”
Related Topics
Business
Mthuli squeezes consumers, businesses – NewsDay
In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.
GOVERNMENT yesterday announced a cocktail of tax increases, pushing up the cost of living and ease of doing business after reviewing its 2024 revenue projection upwards by 22,22% to ZWL$53,9 trillion.
In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.
Treasury initially projected revenue collections to total ZWL$44,1 trillion for the 2024 fiscal year.
“Mr Speaker Sir, in line with the projected economic growth of 3,5%, total revenue collections in 2024 are estimated at ZWL$53,9 trillion, (18,3% of GDP), broken down as ZWL$51,2 trillion tax revenue and ZWL$2,7 trillion non-tax revenue,” Ncube said.
“Guided by the expected revenue envelope and the desired fiscal path, expenditures in 2024 are projected at ZWL$58,2 trillion (19,8% of GDP).”
Ncube announced an upward review on the Strategic Reserve Levy by US$0,03 and US$0,05 per litre of diesel and petrol, respectively, with effect from January 1, 2024, pushing up the cost of fuel.
Ncube also raised tollgate and passport fees beginning next year.
“I, therefore, propose an upward review of toll fees on premium roads, that is, Harare-Beitbridge and Plumtree-Mutare and other roads, with effect from January 1, 2024. Revenue derived from the increased fees will be remitted to the Consolidated Revenue Fund,” Ncube said.
“I, further, propose that passport and selected fees charged by the Central Vehicle Registry be increased, with effect from January 1, 2024. Additional revenue generated from the above measures will be ring-fenced towards road infrastructure development.”
Ncube also introduced a US$0,02 levy per gramme of sugar contained in beverages, a development that will push up the prices of beverages.
He said the move was in response to growing concerns on the adverse effects of the consumption of sugar contained in beverages. Tax on beverages has also been implemented in a number of countries, including in the Southern African Development Community.
Ncube also introduced a new wealth tax to ensure that high-income earners pay taxes.
“In order to ensure that every person contributes to the fiscus in line with their levels of income. I propose to introduce a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000,” he said.
“Resources derived from the levy will be ring-fenced towards urban infrastructure development, in particular roads, water, sewer and community health centres. Principal private residential properties owned by elderly persons above 70 years will, however, be exempt from the tax.”
While the minister reviewed the tax-free threshold on incomes to ZWL$750 000, from the previous ZWL$500 000, inflation has rendered the move mute because of the rising cost of living.
Ncube also targeted foreign companies by introducing the domestic minimum top-up tax (DMTT).
The tax ensures that qualifying entities located in Zimbabwe with an aggregate effective tax rate below 15% be charged a top-up amount, raising the cost of doing business.
“Under the GloBE Tax Rules, where a tax incentive results in an effective rate of less than 15%, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15% (the top-up tax),” Ncube said.
“The DMTT allows the country where the low tax profits arise from the tax incentive to collect the top-up tax rather than ceding taxing rights to the headquarter jurisdiction.”
He said the calculation of the DMTT would be based on the effective tax rate charged on the jurisdictional profits, not the jurisdictions’ statutory corporate income tax.
“I, therefore, propose to enact DMTT rules to guard against ceding taxing rights to foreign jurisdictions on top-up tax arising from tax incentives that are provided to those investments,” Ncube said. The corporate tax rate was also reviewed upwards to 25% from 24%.
Ncube, however, reduced the mandatory value added tax (Vat) registration threshold to US$25 000 from US$40 000, starting next year.
Operators with a minimum annual turnover of US$25 000, or local currency equivalent thereof, are now required to register for Vat.
Failure to register will see applicable penalties invoked, Ncube said.
He said traders registered for Vat purposes and in possession of valid tax clearance certificates would be eligible to procure goods from manufacturers.
“The tax deferred will, however, be fixed at the foreign currency amount payable at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of payment.”
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