3 December 2012

Zimbabwe: Tax-Free Threshold Too Low - Bloch

Bulawayo-based accountant and economic commentator, Eric Bloch, has said the 2013 national budget should have at least pegged the tax-free threshold at US$350, arguing retaining the threshold at US$250 meant the government is heavily taxing the poor.

The current tax-free threshold falls far below the poverty datum line estimated at US$570.

Bloch was addressing a Zimbabwe National Chamber of Commerce (ZNCC) meeting to review the 2013 national budget in Bulawayo last recently.

Describing the US$3,8 billion fiscal policy as a "non-event", Bloch said there were no significant changes in as far as tax rates were concerned.

"The poverty datum line is approximately US$570 for a family of six; the tax-free threshold at which we should tax should be US$350 not US$250," said Bloch.

"But we continue to tax people on an income of US$250 and upwards; we continue to tax the poverty stricken," he said.

He said the current tax-free threshold was not justifiable in a country in which 87 percent was surviving on an income below the poverty datum line.

"You shouldn't tax the poverty stricken," he emphasised.

Bloch said if people were not overtaxed, they could have more disposable incomes that could even go towards Value Added Tax as they spend and in the process contribute to government revenue.

He added that more disposable income could also increase volumes of trade, while enabling people to import more goods and in the process contributing more to the fiscus through the payment of import duties.

Bloch said despite numerous calls for Biti to review the tax rates, the Finance Minister did not adequately address that in his 2013 national budget except for the adjustment of the tax-free bonus threshold from US$700 to US$1000.

Bloch said: "Nothing was done to remove any of the tax rates whatsoever, except for the adjustment on bonuses. But unfortunately many employers in the country cannot afford to give their employees a $1000 bonus."

Speaking at the same meeting, Peter Mgodi, a tax expert with Ernst& Young, said the decision by Biti to set up a special court to deal with tax matters was welcome.

"The question I would raise is: Is it going to be different from any other court that we have in Zimbabwe? We have the labour courts; we (still) have issues of delayed justice. I will leave it to you to answer that question," he said.

Mgodi, who also pointed out that revenue administration in Zimbabwe was not being done properly, said there was need to also tax the informal sector which has been making a lot of money but remain untaxed.

"The informal sector in Zimbabwe is the industry but I do not see the tax administrators, I do not see the minister (of finance) making stringent, can I say serious, efforts to collect revenue from the informal sector," he said.

Copyright © 2012 Financial Gazette. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.