THE Minister of Finance Samuel Mumbengegwi yesterday made minor tax concessions to hard pressed workers which, analysts say, will soon be eroded by rising inflation.
Mumbengegwi increased the tax-free threshold to $30 million from $4 million, an amount which is only enough to buy about 6kg of the low grade of beef.
"I propose to review the tax-free threshold from $4 million to $30 million and also to widen the tax bands to end at $500 million per month, above which income is taxed at 47,5% with effect from January 1 2008," said Mumbengegwi.
In August Mumbengegwi had reviewed the tax-free threshold from $1,5 to $4 million during the mid-term policy review.
"In order to support households during the festive season and their preparations for other expenditures such as new tern school fees, I propose to increase the tax-free bonus and performance related award to $75 million with effect from November 1," he said.
Mumbengegwi also reviewed the non-taxable threshold of retrenchment packages to $1 billion or one third of the retrenchment package, whichever is greater, with an upper limit of $10 billion effective January next year.
Tax credits have reduced the tax obligations on the blind and physically challenged persons in order to increase their disposable incomes. Mumbengegwi increased tax credits for the blind and physically challenged persons to $25 million per month with effect from January next year.
The minister said commercial imports by unregistered traders were only liable to customs duties at the port of entry.
All other taxes that were liable after resale of such commercial imports such as tax on realised profits, Value Added Tax and other related taxes currently remain outside the tax net.
"I propose to levy a 10% withholding tax on the value of all commercial consignments imported by traders who are not registered with the Zimbabwe Revenue Authority (Zimra)," he said.
Mumbengegwi said upon registration of the business with Zimra, withholding tax paid will be credited against tax payable on submission of an income tax return.
Income tax on motoring benefits granted to employees were said to be an additional income that should be grossed to their salaries for purpose of taxation in line with the principle of equity and fairness.
Against this background, tax on a vehicle with an engine capacity of up to 1 500cc was reviewed from $600 000 to $40 million. An engine capacity of over 1 500cc but not exceeding 2 000cc was raised to $60 million from $1 million. A vehicle with a 2 000cc engine but not exceeding 3 000cc capacity was reviewed to $75 million from $1,25 million while an engine capacity exceeding 3 000cc rose to $100 million from $1,6 million.
The minister said a low registration threshold strained the capacity of tax administration, since small-scale enterprises will be compelled to register for Value Added purposes.
"I propose to adjust upwards the threshold for VAT registration to $120 billion per annum with effect from January 2008. The proposed threshold will not apply to registered VAT operators," he said.
Mumbengegwi said value added tax would be levied on all goods disposed of through a registered auctioneer, regardless of whether they belong to a registered or unregistered company or individual with effect from January next year.
Due to the absence of a time frame within which capital gains tax paid should be remitted to Zimra, the time before remittance was in most circumstances too long resulting to tax collected losses value.
Mumbengegwi then proposed the remittance of capital gains tax to be made to the tax authority within 30 days after transfer of the property.
"Provision for penalty and interest for failure to pay or delayed payments will also be put in place to enforce compliance," he said.
Customs duty on fuel which was pegged at $5 000 per litre of diesel or petrol was reviewed upwards to $100 000 per litre effective tomorrow.
A presumptive tax on hair saloon at a rate of $50 million or 10% of gross income per quarter whichever is greater.