GOVERNMENT has extended a huge lifeline to employees after
increasing the tax-free threshold to $3 500 with effect from August 1, 2019, in
order to improve disposable incomes in the face of price increases.
This comes as the highest tax rate on taxable income has
been reduced from 45 percent to 40 percent, to free up some money which could
be channelled towards consumption and potential savings.
The development is in line with the Government’s efforts to
cushion citizens in general, and employees in particular, from the recent surge
in prices.
It implies that civil servants who were recently awarded a
pay increase to $1 023 for the lowest paid worker, will take huge chunks of
their earnings, tax-free.
In a notice, the Zimbabwe Revenue Authority says the
necessary legislation will be announced soon to support the review of the
tax-free thresholds.
“The Zimbabwe Revenue Authority (Zimra) hereby notifies its
valued clients that the highest tax rate of 45 percent on taxable income earned
from employment which was gazetted in the Finance Act (7) No 2 of 2019 is being
corrected to 40 percent,” said Zimra.
“The necessary legislation amending the highest rate from
45 percent to 40 percent will be promulgated in due course and will be with
effect from 1 August 2019.”
Zimra advised employers to effect the correct rate of 40.
Employees earning $3 500 and below will not be taxed while
those earning $3 501 to $15 000 will be taxed at a rate of 20 percent.Those
earning between $15 001 and $50 000 will be taxed at a rate of 25 percent; a
salary of between $50 001 and $100 000 attracts a 30 percent tax; salaries of
between $100 001 and $150 000 attract a 35 percent tax while salaries above
$150 001 will be taxed 40 percent.
Finance and Economic Development Minister Professor Mthuli
Ncube had previously indicated that the tax-free bracket was going to be
increased for those paying income tax and pay as you earn (Payee).
He said the move was designed to give relief to those
earning below the poverty-datum line because of the increase in inflation. “We
want them to have more money to spend in their pockets,” said Prof Ncube.
This becomes the second upward review of the tax-free
threshold this year, after it was earlier adjusted from US$300 to US$350 (
before the removal of the 1:1 exchange rate between the RTGS dollar and the
United States dollar). But the gains made by employees were immediately eroded
by inflationary pressures, which mounted after the removal of 1:1 peg.
The Zimbabwe Coalition on Debt and Development (Zimcodd)
had suggested that the initial RTGS tax-free threshold should be set by
multiplying the US dollar amount by the existing exchange rate.
The review of the tax-free threshold is set to be welcomed by
low-income earners as the country’s inflation rose to 175 percent for the month
of June, torching concerns of value erosion.
Figures from the Zimbabwe National Statistical Agency
(ZimStats) show that Zimbabwe’s annual inflation for June 2019 rose to 175,66
percent from 97,85 percent in May 2019. Herald
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