More consultations on income tax Bill crucial

THE decision by Patrick Chinamasa to increase Pay As You Earn (PAYE) tax on the highest income earners’ bracket to 50% could have adverse effects on attempts to woo back Zimbabwean professionals in the Diaspora, a tax expert has said.

Kudzai Kuwaza

In his 2014 budget statement, Chinamasa increased the rate of tax for those earning above US$20 000 per month from 45% to 50%.

Tax Management Services MD Tendai Mavima expressed concern over the decision by Chinamasa.

“For us we feel the decision to increase the Pay As You Earn rate to 50% was not a good decision,” Mavima said.

“On one hand, we want to attract our foreign intellectual property for us to develop our country together but on the other hand you are saying if you come and you earn so much we will tax you heavily as if it is an offence to earn so much.”

He said this presented a conflict of interest and proposed that the maximum PAYE tax rate be set at 35%.

He said although the proposed Income Tax Bill was in line with international best practice, the government had included some clauses which were “not user friendly.”

One of the clauses Mavima cited is the restriction in the bill on companies to only claim on expenditure for the production of income unlike previously when companies could claim expenses for both production of income and purposes of trade. He said this scenario was not practical.

He added that the definition of the resident individual in the bill, which allows those in the Diaspora to be taxed, could be prohibitive.Mavima said as the business community, they have engaged the authorities on the need for further clarification and is probably why the bill has been postponed from coming into effect at the beginning of the year. He said they had approached the authorities to include practice notes in the bill that give clear interpretation of the bill to avoid confusion by being open to various interpretations.

“If the law is not clear, it will result in a lot of litigation and a lot of legal costs and objections which is not necessary,” he said.

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7 Responses to More consultations on income tax Bill crucial

  1. Charlton Murove January 24, 2014 at 12:58 pm #

    I think a more logical step would be a reduction in income tax and increase in VAT.

    With the majority of the economy being largely informal, an increase in VAT will attract more revenue.

    A reduction in income tax should be such that the worker who is already over burdened is left nuetral.

  2. Chaminuka January 24, 2014 at 1:39 pm #

    Saka Dube paanotambira $230 000.00 Zimra inenge yatora $230 000.00? So this dude is/was earning a gross salary of $460 000.00 if the numbers we see are to be believed. Unbelievable!!

  3. unemployed January 24, 2014 at 1:46 pm #

    Honerable Minister Patrick Chinamasa may u kindly employ the numerous nurses that are rottin at home while the health sector is also going down the drain and reduced to a sorry state.

  4. joe cool January 24, 2014 at 2:35 pm #

    Who is trying to woo back Zimbabwean professionals in the diaspora? Certainly not the Zimbabwe government, who prefer a country populated by 100% serfs.

  5. Just saying January 25, 2014 at 12:41 pm #

    In the current economic climate just how many companies can afford to pay salaries above $ 20,000/month?

  6. sahxy January 26, 2014 at 12:37 pm #

    The problems in Zim is the huge gap between high earners and the lowest earners. If a person earns 20000usd in an economy where a huge percentage of workers earn below 500usd and yet both groups get to pay for the same utility bills then something is very wrong. The state has to overhaul the salary disparities else as an economy we won’t go far by pretending to be some USA in Africa. Most third world countries (from Asia to South America) pay their top executives salaries below 3000usd in local currencies. This madness of someone in an economy as our earning even 7000 usd is madness. Added to that most our so called industry is mainly engaged in importing and selling goods so there is no justification for such salaries.

  7. Mubatiwehomwe January 29, 2014 at 9:25 am #

    For the size of our economy anything above $20,000 a month is already insane. Even if he puts it at 75% it okay. We shouldn’t have anyone being paid above 20k a month in the first place. Remember with PAYE only the amount above 20k is whats taxed at 50%, the rest would have been taxed at the lower rates. Apa I support Chinamasa

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