Source: ZIMRA maintains USD tax thresholds | The Herald (Business News)
THE Zimbabwe Revenue Authority (ZIMRA) has maintained the United States dollars tax thresholds for formally employed people ranging between 20 and 40 percent.
Despite several employers now paying their workers in foreign currency, the collection of Pay As You Earn in US dollars will remain a huge challenge since most payments are being done outside the normal banking channels, analysts say.
Workers earning between US$101 and US$300 per month will be taxed 20 percent and 25 percent for employees earning between US$301 and US$ 1 000, ZIMRA, the State agency responsible for collecting revenue said in a notice this week.
A 30 percent tax will apply to workers earning between US$1 001 and US$2 000; 35 percent to those getting incomes between US$2 001 and US$3 000 and 40 percent to employees earning above US$3 001, ZIMRA said.
Several local companies, especially mining houses are now paying their workers in foreign currency.
Last year, the Government enacted legislation to entrench the multi-currency system, which makes both the United States and Zimbabwe dollars legal tender for all local transactions for the duration of the National Development Strategy 1 (NDS1), the country’s medium-term economic blueprint, which runs until 2025.
Before the enactment of the law, the Government had already legalised the use of foreign currency for local transactions in March 2020 at the height of Covid-19.
There was phenomenal growth in the use of US dollars including loans to corporates and individuals, payments of utility bills and local authorities, and salary payments.
The US dollar-based retail transactions also increased after the narrowing of the gap between black and official exchange rates since August last year when the Government put in place several measures to stabilise the local currency and tame inflation.
“The US dollar-based transactions continue growing despite a relative stability of the local currency,” economist, Carlos Tadya said. “It is more likely that the Government will see a surge in US dollar tax collections this year than the previous.”
“However, there are some tax loopholes that may see the Government failing to collect the money. Most of the payments are not being made using formal channels.
“Most workers are being paid cash, a similar situation we had when we dollarised in 2009.
Last year, Finance and Economic Development Minister Professor Mthuli Ncube warned dollarisation, coupled with high informality would continue to shrink the taxable base, with most transactions going underground where most activities are cash-based.
He said Government would consolidate the stabilisation measures and strengthen revenue collection efficiency through audits and other administrative measures.
Prof Ncube said the Government was modernising tax systems, broadening the tax bases as well as introducing more efficient ways of raising taxes from the informal sector.