GOVERNMENT has reviewed tax thresholds on bonus payments and non-taxable incomes from the current $20 000 to $100 000. The new tax regime on bonuses is with effect from November 1 and for salaries it will take effect at the beginning of the coming year.
Presenting the 2007 budget yesterday, Finance minister Herbert Murerwa said the new tax measures were unavoidable and in recognition of the reality that “we are on our own, as foreign financing inflows have largely dried up”.
He said the thrust of the new tax proposals were broadly focused on enhancing disposable incomes in the hands of taxpayers.
“Government is aware of the growing salary gap between management and shopfloor workers,” Murerwa said. “The current tax structure is however not reflecting this income disparity where low and high incomes of $54 000 and $600 000 per month respectively are subject to the same marginal tax rate of 35%.
“I therefore propose to raise the tax free threshold from $20 000 to $100 000 per month and spread the tax bands to end at $1 million above which income is taxed at a rate of 35%. Accelerated rates of tax will apply on incomes above $1 million.”
The new tax bands will take effect from January 1.
Murerwa said the bonus payments and performance-related awards to employees were a welcome source of additional income for taxpayers, especially during the festive season and the end of year for parents’ preparations for the new school term’s requirements.
“I therefore propose to increase the tax free bonus from the current $20 000 to $100 000 with effect from November 1, 2006. This measure will release about $430 million to taxpayers,” Murerwa said. — Staff Writer.