By EMMERSON NJANJAMANGEZI
ZIMBABWE’S Finance Minister Mthuli Ncube yesterday doubled the tax-free threshold and also committed to improving the welfare of restive civil servants through both monetary and non-monetary benefits.
Presenting his mid-term fiscal review in Parliament, Mthuli also said the depreciation of the Zim dollar and rising inflation were twin challenges that required the support of all stakeholders.
“I 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 is 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.
“I also propose to review the local currency tax-free bonus threshold from $100 000 to $500 000 with effect from 1 November 2022,” Ncube said.
Apart from reviewing the free tax threshold, he also reaffirmed the government’s commitment to improving the welfare of civil servants.
“Government remains committed to addressing the welfare of civil servants in a fiscally sustainable manner.
“The challenges of yester-year where the wage bill crowded out other development expenditures should be avoided in order to create the right conditions for sustainable economic growth that will provide scope for payment of decent salaries to our hard-working workers.
“We are stepping up provision of non-monetary incentives to improve their welfare,” Ncube said further.
This comes amid wage increase pressure from civil servants’ representative bodies which are pushing for the payment of a significant part of their salaries in hard currency.
Zimbabwe Congress of Trade Unions secretary-general, Japhet Moyo, said the tax threshold increase proposal fell short of workers’ expectations.
“We are operating in an inflationary environment and so the figures the minister has announced today may be worthless within a week.
“So, we are very sceptical. We have also not seen any measures that have been put in place to stabilise the currency and the economy.
“We are talking about figures that change every day. In reality all this may mean nothing,” Moyo said.
Weighing in, economic analyst Victor Bhoroma said it was unfortunate that the issue of remuneration of civil servants had not been addressed decisively.
“If you look at the run on inflation that we now have, the cost of living for a family of 6 in June was $111 000.
“So, the $50 000 being proposed as the tax free threshold per month falls below half of the cost of living we had in June.
“This simply means that this does not in any way improve the disposable income for civil servants and obviously it will not do any good for the private sector as well.
“It will also not do any good to the aggregate demand of the economy because most salaries in the private sector are actually indexed to the civil service remuneration model,” Bhoroma said.
“So, $50 000 is actually little. We would have expected that it would be probably $80 000 or $100 000 to at least cushion civil servants and lowly paid workers in the private sector,” he added.
With the soaring inflation, Ncube also said there was need for a supplementary budget of $929 billion for the remainder of the year, to bring the total expenditure for the year to about $1,9 trillion.
“The bulk of the supplementary budget (53percent) is going towards employment costs to cushion public servants against increasing cost of living.
“The balance of the additional resources are going towards meeting government consumables (18percent), capital projects (19percent) and social benefits (7percent),” he said.
Ncube also said the domestic economic situation continued to be impacted by the Covid-19 pandemic, compounded by the recent global tensions, with spill-overs being felt through fuel, food and fertilizer price increases and shortages globally.
“The domestic economy has not been insulated from global developments, particularly from rising commodity prices and inflation, as well as disruptions on supply chains.
“As a result, domestic economic growth for the year 2022 has been revised downwards from the 5,5 percent initially projected to 4,6 percent, reflecting the impact of the external global environment as well as our own unique circumstances,” he said further. – Daily News