Economists have called for the upward review of taxable incomes to boost employees’ buying power in light of growing inflationary pressures.
The non-taxable threshold was last reviewed in January 2022 at $25 000 and economists and businesses are arguing that it is now too low on the backdrop of a sky-rocketing inflation rate.
Zimbabwe’s annual inflation, which touched a record low in two years to 50,1 percent in June last year in response to Government policy measures, has jumped to 192 percent in June, the highest level in over a year, as food costs more than tripled.
Amid the exchange rate volatility, the Zimbabwe dollar now exchanges hands at between $600 and $700 against the greenback on the open market and $379/US$1 on the auction market.
With cost of living constantly going up, economist Victor Bhoroma highlighted the threshold was too low in this current environment, despite salary reviews for civil servants.
In May, the consumer council of Zimbabwe (CCZ) said a family of six required $120 000 a month to survive, but inflation shot to 191,7 percent in June from 131,7 percent the previous month.
Clothing manufacturer Simon Udemba said the current PAYE threshold was no longer sustainable for workers with their disposable incomes highly eroded by inflation.
“With the current high inflationary trends in the country, worker’s disposable income has greatly been eroded.
“PAYE (Pay As You Earn) threshold was last reviewed in December effective January 2022, but since then, the parallel exchange rate has since skyrocketed, even the official rate has also moved.
“In the clothing industry, NEC clothing does monthly increment following inflationary trends, ZUPCO has increased fares 3 folds since January, if not 4 folds.
“Workers are earning much below the poverty datum line yet the Ministry of Finance still maintains the current PAYE threshold, which is not sustainable for workers,” he said.
Mr Udemba added trends at his clothing factory showed several workers were missing work citing high transport costs coupled with other cost of living challenges.
The situation was cascading from business to business transactions where their clients — clothing retailers were cutting on orders citing depressed sales volumes due to low disposable incomes resulting in temporary shut-down of some factories.
“I think it’s long overdue that the PAYE threshold is reviewed,” he said.
With the cost of living continuing to increase, market watchers have agreed it would be ideal to review the taxable threshold to cushion workers who are already constrained as inflation rate has reached the triple digit margin.
“It makes sense that the threshold be reviewed to enable the working class to have improved buying power.
“Treasury is toying on a tightrope and it is time to lobby for a review, although he has to be cautious about it. He can reduce the upper limit but the bottom limit has to move up,” said Pan African Chamber of Commerce Board member Langton Mabhanga.
Treasury has acknowledged the concerns and admitted it was opportune to lobby for review of taxable incomes in time for the Minister’s budget review statement expected to be presented any time from now.
Zimbabwe Congress of Trade Unions president Florence Taruvinga however, said what is key is not the review of the free threshold but for employees to be paid reasonable salaries.
She said even if the tax free threshold is revised upward several times, the salaries might still not be adequate to meet the day to day requirements of employees.
She said instead of pushing for a review of the tax free threshold, ZCTU is rather pushing for the dollarisation of the economy.