THE latest decision to review tax thresholds twice in just over a week shows governmentâ€™s inconsistency and denial over the real state of the economy, analysts said this week.Â
Statutory instrument 63/2008 was gazetted last Thursday against public disapproval of its short-lived predecessor, which was gazetted at the beginning of this month.
Legal experts last week said the initial move to review the tax-free threshold from $30 million to $300 million was illegal.
The new statutory instrument reviewed tax-free threshold from $300 million to $1 billion.
It also slashed tax bands to seven from eleven.
However, the new tax-free threshold is still below 75% of the projected poverty datum line (PDL), which according to analysts ranges from $3,5 to $4 billion for a monthly family basket.Â
Tax consultant Tendai Mavhima said while the decision was a â€œwelcomeâ€ development because government had responded to a public outcry, the tax-free bracket was still insignificant.
â€œBased on the repealed statutory instrument, the decision is a welcome development but looking closely at the $1 billion tax-free threshold, the figure is still not substantial,â€ said Mavhima.
Mavhima said at the current inflation rate workers will continue to push for salary adjustments that will eventually push their incomes into the highest tax bracket of 47,5%.Â
Workers earning $6 billion and above per month are taxed at 47,5%. Those earning $20 billion will be taxed at 60%.
Independent economic analyst John Robertson said despite government repealing the previous statutory instrument, the new tax-free threshold was still unattractive.
â€œItâ€™s still not attractive,â€ Robertson said.
â€œThe figure is enough to buy five bottles of instant coffee. They (government) keep getting surprised by inflation â€” this demonstrates that government has lost in fighting inflation,â€ he said.
Robertson suggested that it was ideal for government to regularly review the thresholds.
â€œAn ideal tax-free threshold would $10 billion this month, then $20 billion the next month,â€ Robertson said.
â€œThis would be in line with monthly salaries that are increasing by an average of one and a half times monthly.â€
However, Obert Gutu, a Harare lawyer and MDC legislator, described the new development as â€œadministrative bunglingâ€ adding that the government was still ignorant of the economic environment.
â€œSince there is no lawful cabinet presently in existence, it follows that all those men and women who are masquerading as cabinet ministers are simply acting outside the provisions of theÂ Constitution of Zimbabwe,â€ said Gutu.
â€œAny statutory instrument purportedly promulgated by a person who has lawfullyÂ ceased to be a cabinet minister is null and void as long as such statutory instrument was promulgated after the date of the dissolution ofÂ the cabinet onÂ March 28,â€ he said.
The government has insisted that the cabinet is still lawfully operating.
By Bernard Mpofu