Budget dampens workers’ hopes

Many experts had expected the minister to increase the thresholds to $50 000 when he presented the mid-term budget review in July.


ZIMBABWE’S civil servants escalated their push for United States dollar indexed salaries on Friday, a day after Finance Minister Mthuli Ncube presented the 2022 national budget with a purse of $927,6 billion (about US$46 billion on the parallel market.

Unions representing civil servants said tax free thresholds announced by Ncube fell far short of rampaging basic commodity prices and noted that a viable solution to the wage crisis would be to revert to United States dollar salaries.

Civil servants, like all other workers began earning in greenbacks at dollarisation in 2009.

However, under currency reforms rolled out in 2019, which ended the multicurrency system, workers now earn in Zimbabwe dollars — currency that has been battered by hyperinflation and exchange fragilities.

In the budget, Ncube increased tax-free thresholds to $25 000 per month, from $10 000.

The $10 000 threshold had been in place since November last year.

Many experts had expected the minister to increase the thresholds to $50 000 when he presented the mid-term budget review in July.

But government has been careful to increase spending money into the consumers’ pockets at the expense of tax revenues.

However, the cost of living has increased higher than the proposed tax-free thresholds.

The Zimbabwe National Statistics Agency (Zimstat) said the November cost of living for a family of five stood at $37 780 per month.

“Higher than projected wage reviews during the course of 2021 by government and some private sector employers have pushed a number of taxpayers into higher income tax brackets resulting in bracket creep and a higher tax burden,” Ncube said when he presented the 2022 national budget.

“In order to provide relief to taxpayers and also boost aggregate demand for goods and services, I propose to adjust the tax-free threshold from $10 000 to $25 000 and also adjust the tax bands to end at $500 000 above which a marginal tax rate of 40% will apply, with effect from 1 January 2022,” the minister added.

According to the Apex Council of Zimbabwe, the largest civil servants’ union, workers earn between $22 000 and $40 000 on average while private sector employees earn between $25 000 and $35 000 in monthly wages.

“Our substantive position remains that salaries should be restored to 2018 levels where the lowest paid civil servant was earning US$475 or thereabout.

“That is the substantive position,” Apex Council spokesperson David Dzatsunga said.

“Maybe that may not happen at once but we prefer a commitment to the restoration of salaries to that level from the start…as long as it (income tax-free threshold) is in Zimbabwe dollars it is just going to evaporate, very quickly actually so I don’t want to classify it as a measure that can really be celebrated.”

In an interview with Standard Business, Zimbabwe Congress of Trade Unions president, Florence Taruvinga said the least  thing Ncube could have done was to link the tax-free threshold to the poverty datum line (PDL).

“The threshold is grossly inadequate and insignificant, the least he should have done is to set it at the current PDL for November which is now at $7 556 per person or about $37 780 per household.

“Annual inflation for November now at 58,4% from 54,49% in October,” Taruvinga noted.

Workers earning their salaries in Zimbabwe dollars have to buy foreign currency on the parallel market for their daily requirements.

But the rate has been shooting, while salaries have been stagnant.

On Thursday, the Zimbabwe National Statistics Agency said the annual inflation rate increased to 58,4% this month, from 54% in October.

MPs said they were not convinced the 2022 budget would solve Zimbabwe’s crisis.

Ruth Labode, chairperson of the health committee, said the package for the health delivery sector fell short of the national’s requirements.

“I’m not happy because if you remove Covid funds the remainder is too little,” Labode said.

“So I’m urging the minister to look for funds,” she added.

Morgen Komichi, an MDC-T senator, said more efforts must be made to resolve the health delivery crisis.

“The budget has supported some elements of recovery,”  Komichi said.

“The only challenge will be the capacity to disburse the money they have allocated to those ministries, the ability to finance the real activities, we hope that this time they will get to finance it.

Ncube also announced a review on the tax-free bonus threshold in the 2022 national budget.

“I also propose to review the local currency tax-free bonus threshold from $25 000 to $100 000 and the foreign currency tax-free bonus threshold from US$320 to US$700, with effect from 1 November 2021,” Ncube said.

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