THE 2021 budget presented by the finance minister Mthuli Ncube to Parliament shows that the minister was living in a ‘fantasy world,’ according to academic, Professor Austin Chakaodza. “Some of the major challenges facing our society are issues of poverty and unemployment. Ninety percent of the people of Zimbabwe were already unemployed before the eruption of COVID-19. The majority of the people continue to lack certain basic capabilities which are encapsulated in the socio - economic rights guaranteed in the constitution,” he said. “They continue to be deprived of basic capabilities - such as the capability to be free from hunger, to live in good health, to be literate and access to a social security safety net. This budget does not fulfil a number of human rights such as the right to food, health, education and training,” Chakaodza said. A big part of Mthuli 2021 budget is a range of new tax measures to fund the ambitious $421,6 billion budget. The highlight of this plan is how the taxman plans to go after the informal sector, which is the bulk of the economy but pays little tax. From new and higher taxes to a new tax unit targeting SMEs, it is a budget that gives away very little, but takes a lot. Here is how some of Mthuli’s measures will affect you. If you are a low-income earner There is not much tax relief for you. The tax-free threshold has only been raised slightly from $5 000 per month to $10 000 per month. Tax bands will begin at $10 001 and end at $250 000 per month. This does little for the poorest workers. For perspective; in October, a Zimbabwean family of five needed $18 750 just to stay above the poverty line. If you earn more than $250 000, you pay the highest marginal tax rate of 40%. If you are expecting a bonus, the bonus tax-free threshold has gone up from $5 000 to $25 000, with effect from 1 November 2020. If you were tired of the 2% tax, sorry The 2% tax on mobile money and other electronic transfers stays. The tax has been unpopular since it came in 2018, but Mthuli says it has “generated substantial resources that have enabled Government to support various infrastructure projects”, including the COVID-19 response. So, the Minister isn’t giving much of this cash-cow away. You will no longer pay the 2% for transactions of up to $500, which is just a small increase from the current $300. For forex transactions, this tax will apply above US$5. The maximum of this tax that your 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. If you were planning to import a car Government will now control the importation of cars that are 10 years or older. Owning a car has just slid further from the reach of the majority, who cannot afford new vehicles. According to Mthuli, Zimbabwe has spent around US$1,3 billion importing buses and used cars over the past five years. Cars older than 10 years are now off the Open General Import Licence. This means that, from 2021, you will need a special import licence for older cars.
