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Widen tax brackets in tandem with inflation



ZIMBABWE must have the most harsh individual taxation threshold in the world. This is mainly due to the fact that over the past four years the country has experienced triple-digit inflation.
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The authorities have not adjusted tax brackets in line with inflation, creating a current situation whereby an individual earning as little as $380 000 per month (which is way below the poverty datum line) is taxed at the top tax bracket of 45%.


The Zimbabwe Congress of Trade Unions has raised this matter before but government has done nothing to address this distressing situation.


Employees, employers and labour bodies should campaign more vigorously to widen tax brackets if they want the situation to be addressed by our government.


I really feel that something needs to be done urgently about the unjust tax system we have in this country. The tax threshold should be adjusted to a minimum at least equal to the poverty datum line which is currently about $860 000 per month.


It is immoral to tax people whose earnings are below the poverty datum line. No society should allow such a burden to be placed on people who are struggling to earn enough money to afford themselves and their families just a single meal a day.


The high individual tax levied on Zimbabweans is discouraging for people who are formally employed. This is one of the many reasons why hundreds of thousands of Zimbabweans over the years have left the country to work abroad to earn higher wages and pay less tax. Their hard work and skills are benefiting other countries more than Zimbabwe.


Government should urgently increase the Paye threshold and widen tax brackets.


Some will argue that this will result in a significant reduction in crucial Paye revenues but this should be compensated for by the Zimbabwe Revenue Authority improving the efficiency and effectiveness of tax collection from other revenue sources such as Vat, corporate tax, custom and excise duty.

Currently Zimbabwe has one of the highest poverty rates in the world with an estimated three quarters of the population living below the poverty datum line.


Increasing the tax threshold and widening the tax brackets in line with inflation will greatly facilitate the reduction of poverty in Zimbabwe.

In addition, a reduction of individual tax (in the medium to long-term) will also be beneficial to the economy as the extra disposable income will be used to purchase goods and services which will stimulate economic activity.


The increased economic activity will create jobs and widen the tax base from which government sources its funds and help our economy recover.


Widening of tax brackets will also lessen workers’ wage demands as the take-home-salary is of much greater importance to employees than the gross salary.


This will have a positive effect on inflation and will go in line with central bank governor Gideon Gono’s current monetary policy of reducing inflation to less than 200% before the end of the year.


I urge the relevant authorities to urgently correct our unjust individual tax threshold and tax brackets.


Zimbabweans cannot and should not wait until the next national budget for this situation to be corrected. The current individual tax system does not benefit the country.


Obi Gadzikwa,

Harare.

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