News / Local
Govt considers 400% rise in tax-free threshold
26 Oct 2021 at 01:41hrs | Views
Finance minister Mthuli Ncube is considering a cocktail of tax reforms, including increasing the tax-free threshold four-fold as part of measures to improve the welfare of the country's workforce.
Ncube, who is under pressure to come up with a $3 trillion budget to adequately fund ministries in 2022, was responding to concerns raised by MPs at a pre-budget seminar for the 2022 national budget in Victoria Falls. The MPs told him that the public was unhappy about the erosion of disposable incomes by inflation.
He said new tax regimes, such as a turnover tax, will be considered for the 2022 budget as part of efforts to grow the national cake.
"I also note the (Budget and Finance) committee's request for Treasury to consider revising upwards, the tax-free threshold from $10 000 to $40 000 and accordingly adjust the tax bands," Ncube said in his speech.
"I am pleased to advise that Treasury will take advantage of the Finance Bill to be presented to Parliament alongside the 2022 national budget to review the tax-free portion of employment income and the tax bands thereof.
"The tax relief will be guided by the ongoing consultations with the private sector, civil society, parastatals and representative bodies of both employers and employees, cognisant of the need to ensure a balance between stimulating domestic demand as well as generating fiscal revenues commensurate with the growth in the gross domestic product (GDP)," he said.
MPs also proposed a reduction of the value-added tax (VAT) rate, currently at 14,5%, but Mthuli rejected the proposal.
"As you would be aware, VAT constitutes an average of about 28% of government revenue, hence any changes to the tax rate have a significant impact on revenue flows to the fiscus, also cognisant of the need for government to finance inescapable expenditures such as infrastructural development, social protection initiatives and procurement of medicines, among others," Ncube said.
"I also wish to advise that the current rate of 14,5% is below the regional average of 18%."
The Finance minister said government was also considering introducing a turnover tax, as part of efforts to grow the cake, adding that this was tied to initiatives of taxing the informal sector where a presumptive tax was introduced early 2021.
"Notwithstanding the above initiatives, Treasury will continue to explore opportunities to enhance the current tax regime, including completing the study on the feasibility of introducing a turnover tax,"Ncube said.
He added that his office was ready to revise the tax system which has been, in some cases, described as unfriendly for new investment, noting a proposal to raise the minimum taxable amount for Intermediated Money Transfer Tax.
"Treasury stands ready to assess and analyse any issues that have contributed to the perceived complexity in the tax system. Stakeholders are, thus, invited to provide specific tax statutes that require enhancement to eliminate the identified complexities."
Youth tax incentives are also being considered for review.
Ncube, who is under pressure to come up with a $3 trillion budget to adequately fund ministries in 2022, was responding to concerns raised by MPs at a pre-budget seminar for the 2022 national budget in Victoria Falls. The MPs told him that the public was unhappy about the erosion of disposable incomes by inflation.
He said new tax regimes, such as a turnover tax, will be considered for the 2022 budget as part of efforts to grow the national cake.
"I also note the (Budget and Finance) committee's request for Treasury to consider revising upwards, the tax-free threshold from $10 000 to $40 000 and accordingly adjust the tax bands," Ncube said in his speech.
"I am pleased to advise that Treasury will take advantage of the Finance Bill to be presented to Parliament alongside the 2022 national budget to review the tax-free portion of employment income and the tax bands thereof.
"The tax relief will be guided by the ongoing consultations with the private sector, civil society, parastatals and representative bodies of both employers and employees, cognisant of the need to ensure a balance between stimulating domestic demand as well as generating fiscal revenues commensurate with the growth in the gross domestic product (GDP)," he said.
MPs also proposed a reduction of the value-added tax (VAT) rate, currently at 14,5%, but Mthuli rejected the proposal.
"I also wish to advise that the current rate of 14,5% is below the regional average of 18%."
The Finance minister said government was also considering introducing a turnover tax, as part of efforts to grow the cake, adding that this was tied to initiatives of taxing the informal sector where a presumptive tax was introduced early 2021.
"Notwithstanding the above initiatives, Treasury will continue to explore opportunities to enhance the current tax regime, including completing the study on the feasibility of introducing a turnover tax,"Ncube said.
He added that his office was ready to revise the tax system which has been, in some cases, described as unfriendly for new investment, noting a proposal to raise the minimum taxable amount for Intermediated Money Transfer Tax.
"Treasury stands ready to assess and analyse any issues that have contributed to the perceived complexity in the tax system. Stakeholders are, thus, invited to provide specific tax statutes that require enhancement to eliminate the identified complexities."
Youth tax incentives are also being considered for review.
Source - NewsDay Zimbabwe
