Maravi

(HERALD) Tax threshold rises to $25bn

Tax threshold rises to $25bn
By Jeffrey Gogo and Martin Kadzere

GOVERNMENT has raised the income tax-free threshold from $1 billion to $25 billion a month, up 25-fold, and expanded higher tax bands by between 25-fold and 75-fold as it seeks to continue protecting disposable incomes of workers against runaway inflation. The new measures, which took effect on June 1, will release approximately $67 000 trillion into the hands of workers for the next seven months, at current tax rates.

Finance Minister Dr Samuel Mumbengegwi said yesterday that the tax relief measures took into account effects of rising prices on the real value of individual incomes.

According to the tax outline released by the Finance Ministry yesterday, the first $25 billion of everyone’s salary or wages for this month, regardless of the total, will not be taxed and the next $25 billion will be taxed at 25 percent.

The second $50 billion will be taxed at 30 percent, widening this tax band significantly, and the third $50 billion of June earnings will be taxed at 35 percent.

The bands widen 75-fold for the next two tranches. That portion of a person’s income lying between $150 billion and $225 billion will be taxed at 40 percent and the next $75 billion at 45 percent.

All income over $300 billion earned this month will be taxed at 47,5 percent although even these earners win as part of income below that level falls into the new wide bands.

The tax threshold is the entry point into the income tax system. It is the income level at which a worker begins to incur income tax to the State.

Secretary for Finance Mr Willard Manungo said future income tax adjustments would be guided by developments in the economy.

"The challenge we have is that each time we adjust the tax thresholds, for some unknown reason, employers will respond by raising the prices of most goods and services.

"The target is to leave the worker with better disposable incomes, but with such tendencies from employers, it becomes difficult. Government is employing strategies that ensure companies will not profiteer at the expense of workers."

Prices of goods and services have risen sharply since the floating of the exchange rate a month ago. Annual inflation was estimated at 165 000 percent for February, the last official figure released by the Central Statistical Office.

Individual income tax is a major component of Zimbabwe’s tax systems. Collections of $8,2 trillion in 2007 constituted at least 25 percent of Zimbabwe’s total revenues while value-added tax contributed 30 percent.

Labels: TAXATION, ZIMBABWE

posted by MrK @ 6:55 PM