Govt reviews tax-free threshold as salary erosion continues owing to hyperinflation

  • Tax-free threshold up 150%
  • Move meant to minimize the tax burden and enhance disposable income
  • Civil service is demanding salaries in USD

Harare – Government has reviewed upwards the tax-free threshold for Personal Income Tax in a bid to cushion workers from bracket creep as inflation continues to erode salaries.

In his 2020 mid-term budget and economic review presentation, Minister of Finance and Economic Development Minister, Professor Mthuli Ncube said Government reviewed upwards the tax-free threshold from ZWL$ 2 000 to ZWL$ 5 000 per month.

He stated that this has been necessitated by the need to minimize the tax burden and to enhance disposable income especially now, a time when most households have been affected by the COVID-19 pandemic.

Consequently, tax bands have been adjusted to begin at ZWL$ 5 001 and end at ZWL$ 100 000, above which the Highest Marginal Tax rate of 40% will apply with effect from 1 August 2020.

The reviews come at a time when Government is clashing with the civil service over poor salaries, with the health sector leading through strikes and demonstrations demand for salaries in US dollars as this has more value than the local currency they are currently earning.

Due to inflationary pressures, salaries for most Zimbabweans are losing value at a faster rate compared to salary increments and in light of that, the cost of living is high for the ordinary Zimbabwean.

Year on year inflation for the month of June stood at 737.26% down from 785.55% in the prior month while monthly inflation rose to 31.66% from 15.23% in May reflecting the highest level of price increases recorded since September 2019.

Adding on to this existing problem, is the COVID-19 pandemic which has had devastating effects on most people not only in Zimbabwe but the world over, making it impossible for people to turn to other forms of generating income for instance through informal businesses as some economic activities are currently restricted.

Government, in June 2020 did promise to pay civil servants a US$ 75 COVID-19 allowance to cushion them against the effects of the pandemic but to date, these have not been paid.

Although the tax-free threshold review is meant to be a relief for workers, it does not go far in solving most problems which workers are faced such as food insecurity due to rapid price increases and the poor harvest achieved in the 2019/2020 summer cropping season which has left more than half the population facing possible hunger.

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