BY MTHANDAZO NYONI/HARRIET CHIKANDIWA FINANCE minister Mthuli Ncube on Thursday proposed to review the tax-free threshold on local currency remuneration from the current $25 000 to $50 000 per month.
But analysts said the measure will do little to cushion consumers battling serious inflationary pressures.
Ahead of the announcement, the Consumer Council of Zimbabwe (CCZ) had proposed that a tax free threshold of over $100 000 would be appropriate.
“We hope that there will be a review of tax free thresholds by wider margins,” Rosemary Mpofu, executive director at CCZ, has said. “An amount in excess of $100 000 or more will do because the $25 000, when it was announced, would buy much more commodities than it can by today. They must take into account low income and consumer buying power,” Mpofu said.
But facing a budget deficit this year, Ncube proposed a $50 000 free tax threshold, which is equivalent to about US$50 at black market rates.
The figure is set to further plummet considering incessant inflationary pressures that continue dogging the economy.
Zimbabwe’s economy has been facing serious headwinds since the beginning of the year, with annual inflation nearing 200% last month, while the domestic currency has been battered on both the official and parallel markets.
Black market kingpins were last week demanding up to $1 000 for US$1.
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These shocks have dislocated the income tax regime, plunging millions into abject poverty, according to the Confederation of Zimbabwe Industries (CZI).
In his presentation Ncube said: “The tax-free threshold was increased to $300 000 or US$1 200 per annum for remuneration earned in local and foreign currency, respectively, with effect from 1 January 2022”.
“I, therefore, propose to review the tax-free threshold on local currency remuneration from $300 000 to $600 000 per annum and also adjust the tax bands to end at $12 million from the current $6 000 000 per annum, above which tax will be levied at a rate of 40 percent, with effect from 1 August 2022. This measure is envisaged to increase disposable income, spur consumption spending and income for corporates,” Ncube said.
Former finance minister and Harare East legislator Tendai Biti said Ncube’s measures had failed to address Zimbabwe’s problems.
“It was a terrible statement,” Biti told Standardbusiness.
“The minister missed the opportunity to address inflation.
“There is an oversupply of money in the economy. He missed an opportunity to address the issue of low wages. He didn’t address the issue of salaries. We are now back to 2008. The supplementary budget is now bigger than the initial budget that we had last year,” he added, referring to the hyperinflationary era which hit Zimbabwe about 14 years ago, leading to the collapse of the domestic currency.
“It is a sad day. It wasn’t worth sitting (in Parliament). What he said has no impact. He missed an opportunity to attend to reform. It is a sad spectacle delivered without energy,” Biti added.
But Ncube said adjustments to wages and salaries were in response to macroeconomic developments.
The Treasury chief also proposed to review the local currency tax-free bonus threshold from $100 000 to $500 000 with effect from November 1, 2022.
In a paper delivered to Ncube ahead of the budget review, the CZI had warned that consumers earning in the freefalling Zimbabwe dollar were now overtaxed, while those with US dollar salaries enjoyed fair taxation.
Tax-free thresholds for those earning in US dollars had remained at US$100 since the government announced the 2022 national budget in November last year, the paper noted.
Following a brutal assault on the domestic currency on the black market, Zimbabwe dollar-earning workers have been driven to penury, the paper indicated, calling for concrete action in the upcoming review.
The cost of living for a family of six shot up to $110 550 last month, according to the Zimbabwe National Statistics Agency.
Salaries, however, have not kept pace with the inflationary developments obtaining in the economy with the majority of citizens currently earning salaries which are way below the $50 000 mark.
Boarding schools and other tertiary learning institutions have moved to demand fees top up from parents citing that the initially paid fees could no longer meet the daily operational demands.
Most basic commodities are now sold in foreign currency.
To boost aggregate demand, CZI had proposed that the mid-term budget review should revise the tax bands upwards, and to hedge against inflation, these tax bands should be linked to consumer movements.
Ncube revised the civil service allocation for employment costs from $492,8 billion to $832,8 billion.