By Anna Chibamu
- Salary tax-free threshold now increased to $800,000
HARARE East legislator Tendai Biti told Finance Minister Mthuli Ncube Wednesday to stop pretending to ignorant about the causes of hyperinflation in the country and why the government was failing to control the challenge.
The opposition Citizens Coalition for Change (CCC) MP told parliamentarians on Wednesday that printing of Zimbabwe dollars to pay cartels in the construction industry was fuelling inflation.
“We know what is driving inflation and, as he knows, it is the trillions of dollars being paid in cartels constructing roads and cartels that are coming from the auction floor,” Biti said.
According to Zimbabwe National Statistics Agency (ZIMSTAT) last week, Zimbabwe’s inflation rate has now eased to 106,3 % from 257%.
Last month the government effectively acknowledged the problem by suspending payments to contractors with Finance Ministry permanent secretary George Guvamatanga accusing the companies of submitting invoices of cash for goods and services using parallel market rates.
The US dollar has been changing hands for between Z$700 and Z$800, more than 40% higher that the official Reserve Bank of Zimbabwe (RBZ) rate.
“Such pricing framework by the suppliers of goods and services, have not only been causing inflationary pressures but also parallel market activities,” said Guvamatanga in a circular dated August 4.
“This has resultantly caused instability in the foreign exchange market characterised by unnecessary movements on the rate resulting in exorbitant prices being charged.”
Meanwhile, Prof Ncube gave-in to sustained pressure from MPs to increase the tax-free salary threshold in view of the current hyper-inflationary environment.
Debating Clause 2 of the Finance Bill which is still at Committee stage urged Biti called on the treasury chief to increase the threshold to $1.2 million.
“The working people should have better wages and so he must do the decent thing by paying and giving workers a decent opportunity by increasing the tax free threshold to Z$1.2m,” he said.
“So if we are going to be meaningful, he must do the right thing and increase the tax free threshold to Z$1.2m.”
The Finance Bill had sought to increase the tax threshold to Z$600 000.
“Six hundred thousand at the official exchange rate is US$50, so it is meaningless, it is pointless,” said Biti.
“The minimum tax threshold must be measured with the poverty datum line (PDL) and if the PDL salary is USD$282, then the minimum threshold must be as close to that.
“So we propose that the threshold, if it is to make a difference to our people must be at least $1.2 million.”
CCC Mutare Central MP Innocent Gonese chipped in, saying, “In view of the hyper-inflationary environment that we are living in, it is imperative for the Hon. Minister to adjust those thresholds because when you look at the figure of $250,000 and you look at it in the context of the real hard currency, you find that figure is very low and I suggest that the figure should be revised upwards.”
Dzivaresekwa MP Edwin Mushoriwa said when the 2022 budget was presented in November last year, official RBZ exchange rate was around 1:85 and has since increased to around 1: 480.
“Any adjustment in terms of the tax-free threshold should also take note of those changes to make sure that the amount of money be moved by about five times from $300,000 per annum to something probably around $1.5 million rather than the current where the Minister just raises it from $300 000 to $600 000,” Mushoriwa said.
Contributing to the debate, MDC Alliance MP Paurina Mpariwa; “This budget is meant to be centred on poor people.
“The time we are going to go back on this particular Bill, it will have been eroded by inflation and I humbly submit that it be increased to Z$1.5 million so that it is meaningful in terms of the purchasing power.
“The workers are suffering and everyone else.”
Harare North MP Rusty Markham added; “is the minister saying anyone who earns more than Z$50,000 per month is no longer poor and they can be taxed?
“The PDL is way above that. In simple terms, he has to review it upwards.”
In response the representations, Prof Ncube then proposed to increase the minimum tax-free threshold to $800,000.
“I propose that I move the minimum tax-free threshold from Z$600 000 to Z$800 000,” he said.