Zimbabwe: government to review high compression taxes

Finance Ministry Secretary George Guvamatanga said the government is committed to reviewing the exorbitant tax thresholds applied to current reduction plans ahead of the declaration of the 2022 national budget as part of a development to protect the income of the workers concerned.

The pledge comes in response to a letter “from the Zimbabwe Banks and Allied Workers Union (ZIBAWU) drawing the Treasury’s attention to the fact that employees receiving their layoff plans in US dollars pay more in taxes than those earning the local currency”.

The bank workers’ union said the current amount of a tax-exempt layoff plan is the greater of $ 50,000 or one-third of the layoff plan up to a maximum of $ 240,000 is exempt or the greater of US $ 3,200 one-third of the flat-rate termination up to a maximum of US $ 15,100 is exempt.

In addition, considering the current discount rate which is set at $ 1 versus $ 85 if the tax-exempt Zimbabwe dollar amount is converted to U.S. dollar, the amounts will be equivalent to the greater of $ 588.23 or one-third of the package reduction, up to a maximum of US $ 2,823.53 is exempt, ”ZIBAWU said.

“In view of the above, it is clear that the current amount of tax exemption for employees who earn in Zimbabwean dollars is small compared to their counterparts who earn in US dollars.”

The union said the compressed tax-exempt amount for employees earning in local currency has resulted in high taxation and as a result final payments are now insignificant.

“We are humbly convinced that employees are already suffering from the current wage erosion due to austerity measures and wage cuts. The current tax regime is not only punitive for dismissed employees, but also anti-social given the poor prospects for alternative employment.

“We call on your department to write them off by providing tax breaks for a period of time as a social benefit for this job loss in these difficult times. Another option would be to significantly increase the amount of tax in order to reduce the taxable burden. .

“We hope that you will adopt these measures and that you will mainly modify the current formulas from January 2021 in order to alleviate the fate of the recently dismissed workers”, pleaded the union.

However, in responding to the request, Guvamatanga has agreed to consider the issue in the next budget.

“The Treasury recognizes the high tax burden on the layoff plans. A review of the severance pay tax exemption threshold will go a long way in easing layoffs, most of which will seek to use the layoff plan as seed money for themselves – helping projects, “he said. he declares.

“In this regard, I would like to inform that the Treasury is committed to reviewing the tax-exempt part of the lump sums within the framework of the 2022 national budget.”

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