Nqobile Bhebhe
Zimpapers Business Hub
THE Treasury is facing growing calls to introduce more tax relief measures for workers and businesses, including a higher tax-free income threshold, further cuts to the Intermediated Money Transfer Tax, and fuel subsidies.
This comes as economic agents push for interventions to lower production costs and stimulate economic activity via the 2027 National Budget.
The latest proposals were made during the first day of the 2027 Pre-Budget Seminar in Bulawayo yesterday.
The proposals include calls for more disposable income, reduced electronic financial transaction costs and lower business operating expenses, particularly those that involve fuel-intensive operations and frequent digital payments.
The national budget will be presented on November 19.
Budget Finance Committee chairperson Mr Lincoln Dhliwayo said economic agents proposed raising the tax-free income threshold from US$100 to US$150 to provide additional relief to lower-income earners.
“There was a proposal that was raised concerning the tax-free threshold currently standing at $100.
“So people . . .wanted that tax-free threshold to be raised to $150,” he said while presenting the committee’s report.
Finance Minister Professor Mthuli Ncube told participants at the seminar the Treasury is “seriously considering the proposals”
“As Treasury, we are seriously considering the proposals and discussions are ongoing,” he said.
The proposed adjustment would increase the portion of income that workers earn, which would leave qualifying employees with more disposable money for household expenditure.
For businesses, improved household purchasing power could support demand for goods and services, particularly in retail, manufacturing and other sectors that rely on the domestic market.
This comes as the Government prepares the 2027 National Budget, with the consultative process affording stakeholders an opportunity to recommend fiscal measures that balance revenue mobilisation with economic growth, investment and the welfare of citizens.
Mr Dhliwayo said another key proposal was for the Government to maintain the fuel subsidy to keep prices below US$2 per litre, helping reduce costs for producers and consumers.
“There was a proposal to ensure that the government continues to subsidise our fuel so that it is made below two dollars so that at least the cost of production and also the cost to consumers is somehow reduced.”
Fuel prices have a direct bearing on the cost structure of businesses across agriculture, mining, manufacturing, transport and distribution.
Affordable fuel can help reduce the cost of moving raw materials and finished products, operating machinery and delivering goods to markets.
Any relief in these areas could help businesses manage expenses while easing price pressures on consumers.
However, the fiscal implications of sustaining fuel subsidies will also dominate the budget discussions, particularly as the Government balances support for economic activity against competing public expenditure requirements.
The proposed reduction in IMTT emerged as another key recommendation, with stakeholders seeking lower rates on both Zimbabwe Gold (ZiG)-denominated and United States dollar transactions.
Mr Dhliwayo said the proposals sought to build on the reduction already implemented for local-currency transactions.
“Then another proposal had to do with the IMTT. You recall that last year the IMTT was reduced from 2 percent to 1,5 percent, but there was a proposal to try and reduce that IMTT rate from 1,5 percent for ZIG to 1 percent and from 2 percent to 1 percent for USD transactions.
“This is to try and reduce the cost of electronic transactions so that we promote electronic transactions.”
The proposal comes as the Government considers further reductions in the tax, which could lower the cost of transferring money electronically for individuals, retailers, manufacturers and other businesses that rely on digital payments.
The IMTT on ZiG-denominated payments was reduced from 2 percent to 1,5 percent in January this year, while transactions conducted in foreign currency remained subject to the 2 percent tax.
Under the proposals raised at the seminar, the ZiG rate would fall further to 1 percent, while the rate on United States dollar transactions would also be reduced to 1 percent.
If adopted, the proposed changes would lower transaction costs across both currencies, potentially allowing businesses to retain more working capital and consumers to keep a greater share of their money when making electronic payments.
A reduced IMTT rate would be strategically important as the use of the ZiG in the national payments system continues to grow.
Transactions settled through the ZiG national payments system accounted for 43 percent as of August this year, highlighting the currency’s growing role in domestic financial transactions.
There are views that further reduction in IMTT could strengthen efforts to make electronic payments more affordable while supporting the wider use of formal financial channels.
The tax was introduced in October 2018 and has since featured prominently in discussions around the cost of financial transactions, banking formalisation and the use of electronic payment systems.
The reduction in the ZiG-denominated IMTT earlier this year was among several resolutions implemented following last year’s ZANU PF Annual National People’s Conference.
The resolution sought to promote formalisation and banking by removing certain IMTT charges on transactions and reducing other bank fees.
It also aimed to make the ZiG more accessible, affordable and attractive for domestic financial transactions, thereby promoting financial inclusion and strengthening monetary stability.
The proposed additional reduction would build on these efforts by addressing the cost of electronic transactions, which remains an important consideration for businesses and individuals choosing between different payment channels.
Lower transaction costs could also improve the efficiency of settling supplier invoices, paying employees and receiving customer payments.
At the same time, the proposed cuts would need to be assessed against their implications for Government revenue, with the final policy decision balancing the benefits of lower transaction costs against the need to finance public services and infrastructure.
The three proposals — raising the tax-free threshold, sustaining fuel subsidies and reducing IMTT — reflect calls for a 2027 Budget that supports households and productive enterprises through measures that ease cost pressures.
A higher tax-free threshold would target disposable incomes, fuel subsidies would seek to contain production and transport costs, while lower IMTT rates would reduce the cost of moving money through electronic channels.
Taken together, the measures could help improve the operating environment for businesses while supporting consumption and the broader formalisation of economic activity.
As the pre-Budget consultation process continues, the recommendations will feed into wider discussions on the appropriate balance between tax policy, public expenditure and measures to sustain Zimbabwe’s economic growth momentum.
Source: Treasury faces growing calls for sweeping tax relief – herald
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