HomeBusiness DigestGovt adjusts tax thresholds

Govt adjusts tax thresholds

Roadwin Chirara

FINANCE minister Herbert Murerwa in his 2006 budget statement yesterday adjusted the PAYE threshold from the current $1,5 million to $7 million while the income tax band was widened to $40 mi

llion per month with effect from January 2006.

“Individual taxpayers remain a major contributor to tax revenue, in part reflecting the impact of inflation on incomes, hence the need for relief through regular review of the PAYE bracket and tax thresholds,” said Murerwa.

“In pursuance of this, I propose to adjust the tax-free threshold upwards from the current $1,5 million per month to $7 million per month. Furthermore, I promise to widen the tax band to end at $40 million per month, above which income is taxed at 35%,” said Murerwa.

The Value Added Tax (VAT) threshold for corporates was increased to a minimum turnover of $6 billion with effect from January 1.

Previously companies with a minimum turnover of $250 million qualified to be registered for VAT.

He said the revision of the VAT threshold had been necessitated by the erosion of the current threshold by the rise in inflation and increased demand in administration of the amounts.

“The current VAT threshold was put in place at the inception of VAT in January 2004.The threshold has, however, been eroded by inflation, greatly stretching the Zimbabwe Revenue Authority (Zimra) VAT administration capacity as officers now have to deal with larger numbers of taxpayers qualifying for VAT registration,” said Murerwa.

He said taxpayers with revenues below the new thresholds will be accommodated under the voluntary registration process.

“Currently VAT registered taxpayers whose turnover is below the proposed threshold may be accommodated under the voluntary registration,” Murerwa said.

He said all revenue collections for provision of services in foreign currency shall, with effect from January 1 next year, be remitted to Zimra in hard currency.

“I propose that VAT collected in foreign currency on provision of services be remitted to the tax administrator in foreign currency with effect from January 1, 2006,” said Murerwa.

The minister also reviewed the carbon tax collection mode where the tax will now be collected according to vehicle’s fuel consumption levels as compared to the previous mode which was based on engine capacity.

“I propose to change the current mode of payment, where carbon tax is levied according to engine capacity, to a system based on fuel consumption. Carbon tax will, therefore, be collected at the point of fuel importation at a rate of $1 000 per litre with effect from January 1, 2006,” Murerwa said.

He said the move was aimed at alleviating the time spent by taxpayers queuing to pay the tax.

He however said motor vehicles transiting through Zimbabwe will still be required to pay the tax based on their engine capacity.

He proposed the charging of penalties on unpaid taxes with effect from January 1.

“I propose to amend the tax legislation to address this by empowering the commissioner general to charge market-related interest on unpaid penalties with effect from January 1, 2006,” Murerwa said.

He said withholding tax on interest earned will now be deducted on maturity as compared to the current system where it is being deducted upfront.

He said the country’s informal sector will now be taxed under the presumptive tax as part of efforts to bring the sector into the tax net.

Driving schools and truckers will now be entitled to pay presumptive tax unless they want to register with Zimra and pay corporate tax.

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