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Wednesday, April 21, 2021

2021 Budget: The taxes

Finance and Economic Development Minister Professor Mthuli Ncube 2021 National Budget seeks to widen Government’s tax collection net, a development that is expected to pile more tax misery for hard-pressed Zimbabweans.

To fund the ambitious $421.6 billion budget the Treasury Chief introduced a cocktail of tax measures that will likely squeeze the country’s citizens, especially the poor, of their hard-earned dollars. 

Minister Ncube’s budget proposals include new taxes for Small-Medium Enterprises while offering very little tax relief to low income earners.

Below we look at some of the new and recalibrated taxes in the 2021 budget.

More IMMT Misery

Minister Ncube gave the clearest indication that the Inter-mediated money transfer (IMMT), also known as the 2 percent tax, is not going anywhere any time soon.

The unpopular tax regime, introduced two years ago, was recalibrated marginally with transactions below $500 now exempted up from the current $300.

For transaction in US dollars, the tax will apply for transactions above US$5.

For businesses, the maximum a business can pay has been raised from $25 000 to $800 000 on transactions with values exceeding $40 million, with effect from 1 January 2021.

This is unlikely to provide much relief for citizens and business who have been calling for the scrapping of the tax.

“Sin tax” for drinkers, smokers

Excise duty on tobacco and alcohol is going up to the equivalent of US$5 per 1 000 cigarettes plus 20% of the ex-factory price.

In short, excise duty on tobacco is up by 300%, 700% for spirits and 600% for beer.

Little relief for low income earners

The Finance Minister proposed to raise the income tax-free threshold to $10 000 per month up from $5 000, ostensibly to provide low income earners with more disposable income.

The new measure will, however, provide little relief given that the poverty datum line, according to Zimstat, stood at $18,750 for the month of October.

Further, the lowest paid Government worker earns around $14 000 a month after last month’s salary review.

Commendably, the bonus tax-free threshold was raised to $25 000 effective November 1.

SMEs placed under the cosh

Small business operating from stalls at shopping complexes dotted around the country are likely to reel under the new tax regime which compels them to pay up to US$30 in taxes for a single stall.

Also include in this category are restaurant and bottle store operations which will now pay $10 000 a month to the tax authority.

Hair saloon operators will pay $2 500.

Landlords take a hit

Owners of business complexes from where small businesses operate are now expected to make sure that their tenants pay up monthly presumptive taxes to the taxman.

Failure of one’s tenants to pay the taxes will attract a penalty equivalent to the amount of tax payable and interest.

Zimra will establish an enforcement unit to enforce this new rule.

Tax for the self-employed

Small businesses with no tax clearance will now be expected to pay monthly presumptive tax for their operations.

Doctors, engineers and lawyers will now have to pay $500,000 in presumptive tax per month, while architects are expected to pay $250,000.

Realtors will bear the full brunt of this tax as they will now pay up to $1 million monthly to the taxman.

More for fuel importation

The price of diesel will likely go up, after excise duty for the fuel was increased by US$0.05 to US$0.30.

A petroleum import duty of US$0.05 will also now be added to fuel imports that come into the country by road.

Government wants to cajole fuel importer to us its Beira fuel pipeline.

This will likely see Zimbabweans having to pay more fuel at the pump while operational costs for business will also increase, having the domino effect of price hikes.

Tax incentives for workers and citizens

  • PAYE tax free threshold increased to ZWL 10 000 from ZWL 5 000
  • IMTT tax free threshold reviewed up to ZWL 500 from ZWL 3000
  • Youth employment tax reviewed to ZWL 1500 per month from ZWL500
  • Foreign currency corporate tax to consider the liquidation thresholds stipulated by RBZ
  • Tax free bonus threshold increased to ZWL 25 000 from ZWL 5 000

Industry-related tax incentives

  • Duty rebate on fertilizer producers
  • Duty suspension on powdered milk extended
  • Import duty suspension on motor vehicles imported by Safari Operators
  • Shoe Manufacturers Rebate on raw material importation
  • Extension of the duty suspension on importation on cross-border luxury buses
  • Tax Incentives for Real Estate Investment Trusts (REITs)

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