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Farirai Machivenyika Senior Reporter

From the beginning of this month, the tax free portion of every salary subject to PAYE has been raised from $91 666 to $500 000 by Government with the lower level tax bands above that threshold significantly widened to ensure that most ordinary workers will take home most of the significant recent salary increases.

Changes in the value in local currency resulted in salary increases for most monthly paid workers, who are subject to PAYE, and who found themselves paying a higher percentage of their salary in taxes than before because chunks of their new salary were being taxed at much higher rates.

At present, all income over $1 million a month is taxed at the top rate of 40 percent, pushing part of the pay of fairly junior staff into the top bracket after they have filled the 20 percent, 25 percent, 30 percent and 35 percent brackets.

Permanent Secretary for Finance and Economic Development Mr George Guvamatanga last Friday notified Zimra Commissioner General Ms Regina Chinamasa of the changes.

“As you are aware, the local currency Pay as You Earn (PAYE) tax table which comprise a tax-free threshold of Z$91 666 per month, with the highest marginal tax rate of 40 percent on incomes above $1 000 000 per month, was last reviewed with effect from 1 January 2023,” Mr Guvamatanga said.

“Due to recent macroeconomic changes that necessitated salary reviews, a significant number of employees are caught up in a bracket creep, consequently, some salaries and wages are subject to higher rates of tax.

“In order to provide relief to taxpayers and also boost aggregate demand for goods and services, Treasury has approved a review of the local currency tax tables with effect from 1 August, 2023.

“The tax-free threshold has been reviewed from $91 666 per month to $500 000 per month, whilst the highest marginal tax rate of 40 percent now applies on income above $15 000 000 per month.”

In Zimbabwe each slice of monthly income is taxed at a different rate and even if part of your income is taxed at higher rates every taxpayer has the lower slices of their pay taxed at the lower rates.

The slice under $500 000 is the tax-free slice. The next five slices are: Income between $500 001 and $1 500 000 taxed at 20 percent; income between $1 500 001 and $5 000 000 taxed at 25 percent; income between $5 000 001 and $10 000 000 taxed at 30 percent; income between $10 000 001 and $15 000 000 taxed at 35 percent; and anything over $15 million taxed at 40 percent. Government can make the changes but will need to have these confirmed by the new Parliament when it meets after the elections.