Tax threshold review bodes well for retail, manufacturing sectors

The Government’s move to increase tax threshold rates to $500 000 from $91 000 per month presents positive prospects for increased business for retail and manufacturing sector taking advantage of enhanced consumer disposable income and purchasing power, economic experts and consumer watchdog bodies have said.

Recently, the treasury announced an upwards review of the tax-free threshold to $500 000 per month from $91 000 effective this month with the highest marginal tax rate of 40 percent now applicable on income above $15 million per month.

The upward review is seen as a huge relief to workers as it is expected to restore the purchasing power of the working class and boost aggregate demand for businesses.

us dollars

The manufacturing sector has been implored to increase production levels to cater for expected high demand for various goods and services.

Lupane State University Business Clinic manager Mr George Nhepera told Business Chronicle that apart from workers benefitting, the retail sector sales will witness an increased demand for goods.

“From an economic point of view, it means more disposable income for the workers and good prospects for increased business for retail shops as consumers buy products,” he said.

He said adjustment comes at a time when economic fundamentals are strong in maintaining exchange rate stability while inflation is expected to continue falling giving a reprieve to consumers.

In the second quarter of the year, the country experienced widespread price hikes due to the depreciation of the domestic currency.

Authorities responded through a series of policy measures, which have successfully restored macroeconomic stability.

The measures included hiking the bank policy rate from 140 to 150 percent, transferring external payment obligations from the central bank to the Treasury and collecting all duties (except for luxury goods) in local currency.

Mr Comfort Muchekeza

Further, the Government directed the Zimbabwe revenue authority to collect in local currency half of corporate tax payable in foreign currency and all statutory fees and charges are being settled in local currency.

The policy measures halted the flow of excess liquidity into the economy and increased demand for the domestic unit, which has seen it appreciate against the greenback.

Zimbabwe dollar prices of goods and services, inflation and parallel market exchange rates have been plummeting in response to the strengthening domestic currency.

Matabeleland region Consumer Council of Zimbabwe (CCZ) manager Mr Comfort Muchekeza said the review is a relief for workers but expressed concern that the review could be undermined by unscrupulous business entities who have a penchant of randomly increasing prices of good and services.

“The review of the tax free threshhold from $91 000 to $500 000 per month is a welcome development although more still needs to be done,” said Mr Muchekeza.-chronicle