Tax-free threshold for individual incomes increased to ZW$600 000 per year

By Justin Mahlahla and Stanley James

Government has revised the tax-free threshold on local currency remuneration from ZW$300,000 to ZW$600,000 per annum, while tax bands will end at ZW$12 million from the current ZW$6,000,000 per annum.

Amounts above the ZW$600 000 threshold will be levied at a rate of 40 percent, with effect from 1 August 2022.

This came out during the Mid Term Budget and Economic Review and Supplementary Budget presentation by Finance and Economic Development Minister, Professor Mthuli Ncube this Thursday afternoon.

The measure is envisaged to increase disposable income, spur consumption spending and income for corporates, said the Minister.

Professor Ncube also proposed a review of the local currency tax-free bonus threshold from ZW$100,000 to ZW$500,000 with effect from 1 November 2022.

Despite the measures put in place to cushion the masses against inflationary tendencies and an unstable exchange rate, Professor Ncube noted that the economy must withstand continued geo-political tensions that are driving the surge in international food and oil prices (imported inflation); growth in broad money driven by excessive liquidity held by banks despite reserve money being targeted at 0%; adverse inflation expectations; speculative tendencies; and continued arbitrage in the economy.

Meanwhile, economic stabilisation measures announced by the Minister will include continued monitoring of price
and exchange rate developments with a view to introducing additional response measures aimed at restoring stability and facilitation of the development of primary and secondary markets for debt instruments, in order to improve monetary policy transmission and further create demand for local currency denominated financial assets.

“Notwithstanding the numerous global and domestic downside risks, the domestic economy is still projected to record increased activity in the sectors of mining (9.5%), construction (10.5%), accommodation and food services sectors (50%), among others,” said Professor Ncube.

He said economic growth is projected to be underpinned by maintenance of the multiple currency regime; continued fiscal consolidation and tight monetary policy stance, among other factors.

Presenting the ZW$929 billion supplementary budget, Professor Ncube justified the proposed adjustments saying, “The proposed supplementary budget has a financing gap of ZWL$157,5 billion, which will be met through issuances of Treasury Bills and domestic loans. The issuances include the impending US$ denominated bond of US$100 million to be issued through the Victoria Falls Stock Exchange.”

He added, “Economic performance during the first half of 2022 reaffirms the positive growth trajectory as projected in the 2022 national budget. GDP growth in 2022 is however now projected to slow down to 4, 6 percent from the 5,5 percent initially projected.”

The budget review presented an opportunity for the revision of initial estimates, while also enabling fiscal authorities to focus on economic growth.