New Bank of Tanzania rules seal fate of forex bureaux

Saturday June 22 2019

 

By Alawi Masare @AMasare malawi@tz.nationmedia.com

Dar es Salaam. The fate of most of the forex bureaux which were shut down in a government crackdown last December is now almost sealed. This is after the central bank issued tighter rules to govern their registration.

A new minimum capital requirement of Sh1 billion for one to secure a bureau de change licence has dealt a hefty blow to the majority of those who had harboured hopes of a comeback.

The Bank of Tanzania (BoT), which regulates the industry, had previously pegged the minimum capital requirement at Sh300 million.

The 2019 Regulations, which were released recently, revoke those of 2015, which were last amended in 2017.

Apart from the new capital requirement, one must submit a detailed feasibility study to substantiate a demand gap in the intended location of the shop.

Sources within the industry have also claimed that they were summoned and slapped with accumulated tax bills that go back to as far as 2014. The sources - who preferred anonymity - said the bills are as high as Sh3 billion.

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However, neither the BoT nor the Tanzania Revenue Authority (TRA) commented on this when contacted.

“It’s really tough for us as the rules are too demanding. Small operators will be thrown out of business, and those with muscle will earn big because only a few of them will remain,” said the source. “The central bank confiscated our money during its crackdown and now we are told to pay more than our capital.”

The central bank closed more than 50 forex bureaux last year, citing tax evasion and money laundering.

President John Magufuli was also quoted as saying that the government intervened after realising that some operators had up to seven unregistered shops, which created room for tax evasion. He also noted that the money exchanged through some forex bureaux was not reflected in TRA records - hence creating another loophole for tax evasion.

Under the new rules, forex shop operators are required to gather identity information of the person exchanging money, including the source and planned use of the foreign currency.

For those travelling outside the country and intend to buy foreign currency, some forex bureaux in banking halls are also demanding air tickets as proof.

Finance and Planning Minister Philip Mpango said last December that the government would continue to keep a keen eye on the operations of forex dealers.

“The government, through the Bank of Tanzania (BoT) is continuing to take measures that strengthen the forex business in the country, and avoid any possible involvement in illegal business including money laundering,” he said when delivering a report on the state of the country’s economy and the six months implementation of the government budget for FY-2018/19.