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Call to review Zimbabwe tax thresholds

by Staff reporter
26 Jun 2022 at 08:09hrs | Views
Government has been implored to increase the exemption threshold on payroll tax to cushion workers from current challenges such as high inflation and the contagion effects of conflict between Russia and Ukraine.

With the tax-free threshold at $25 000, the majority of workers are now being taxed.

This is at a time Zimbabwe's inflation for May 2022 rose to 131,7 percent, the highest this year while the local dollar has depreciated to $352,06 per US$1 (on the Reserve Bank of Zimbabwe's auction system) from $115 on January 31, 2022. The interbank rate is at $359,70.

The Consumer Council of Zimbabwe's family basket is now $120 000 for a family of six while rising global inflation and tighter supply chains due to the ongoing armed conflict between Russia and Ukraine have resulted in incomes and consumer purchasing power being severely eroded.

Since Russia launched its military operation in Ukraine on February 24 this year, the price of petrol and diesel has gone up by 20 percent and 22 percent respectively.

And with little prospects of ending the conflict between Russia and Ukraine, further increases are expected, with oil prices expected to hit US$150 per barrel by September, according to some analysts. This will further increase the costs of transport.

"The Government needs to consider exempting low-income workers from paying tax especially when inflation continues rising . . . food prices are going up so is fuel.

"We desperately need a reprieve," Sandra Gadza, a shop attendant with a local retail chain said.

The Zimbabwe Congress of Trade Union (ZCTU) secretary-general Mr Japhet Moyo said it was critical that Government considers increasing thresholds of taxable incomes.

"The incomes are dwindling and we are facing a triple-digit inflation," said Mr Moyo.

"It will be a good idea to make sure workers get a reprieve through raising taxable thresholds and we hope the authorities will consider this option.

"We are hoping to raise the matter when the Tripartite Negotiation Forum resumes," Mr Moyo added.

Consumer Council of Zimbabwe acting executive director Ms Rose Mpofu told The Sunday Mail Business that while the desired scenario was to have a stable domestic currency, increasing the non-taxable incomes was a step in the right direction "to cushion the already constrained workers from the tough economic environment."

Chief director (communications) in the Ministry of Finance and Economic Development Clive Mphambela told The Sunday Mail Business in an interview that the concerns being raised were "reasonable."

"It's a reasonable proposition which comes at a time the Minister (Professor Mthuli Ncube) is due to present the budget review statement next month," said Mr Mphambela. "It is the opportune time for the trade unions and stakeholders to make submissions for consideration."

Economics professor, Gift Mugano, said with the consumer basket at $120,000 for a family of six "it follows that our minimum tax-free threshold should move to the same region.

Taxing $25 000 is synonymous with milking a very sick cow."

With the cost of living continually rising, there are growing calls for an immediate easing of taxation on fuel to soften inflation blows in light of the ongoing Eastern European conflict.

This month, the price for blended petrol shot up to US$1,73 per litre and diesel rose to US$1,76 per litre. Another monthly review is due next week.

Maintaining the current tax regime on fuel has a direct and positive impact on inflation, some analysts say.

Diesel attracts levies and taxes amounting to US40 cents per litre while taxes on petrol amount to US49c per litre.

These include duty (US30c per litre for both diesel and petrol), the Zimbabwe National Road Authority road levy (US2c), carbon tax (US4c) and strategic reserve levy (US0,047c) for petrol and (US12c) for diesel.

Source - The Sunday Mail