HomeBusinessBanks get offshore account tax reprieve

Banks get offshore account tax reprieve

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HARARE — Zimbabwe Revenue Authority (Zimra) has agreed to hold onto plans to tax bank offshore accounts, saying the move was intended to allow the central bank to tighten supervision of the financial institutions to ensure they are upholding prescribed external deposit limits.

In April, Zimra indicated that it would seek to have a tax imposed on bank deposits held offshore, in a bid to force them to raise funds held locally and improve liquidity in the economy.

A 2012 central bank directive ordered banks to hold only up to 30% of their total deposits offshore. At the time, an estimated $500 million was held in offshore accounts. Banks hold offshore deposits to facilitate settlement of foreign exchange and trade transactions.

However, Zimra commissioner-general Gershem Pasi on Monday told a parliamentary committee that investigations had shown banks were abusing the system to keep more than the stipulated deposits abroad in order to avoid paying tax and loaning to locals.

He said Zimra was consulting with the finance ministry and the Reserve Bank of Zimbabwe (RBZ) on the taxation proposal.

“It’s something we are now discussing and hope we can find workable solutions going forward,” he said.

“In our discussions last week, the (RBZ) governor conceded that it was more of supervision or lack thereof of those accounts by the central bank. I am sure we should give him time, he is looking into that. We hope that things can be normalised such that we do not keep a lot of money outside.”

Pasi accused foreign-owned banks for declining to give loans to locals and where they did, charged high interest rates while others benefited from cheap loans.

“And in our digging deeper we found (out) that there were certain clients of the banks in the country who were getting funding at low rates and it was reported to be external off-shore loans,” he said, adding that some banks claimed that the offshore loans were being facilitated by their parent banks oversees.

— The Source

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