TREASURY is in the process of raising the taxable property value from US$100 000, following a public outcry that the current threshold includes low-to-middle-income earners.
In the 2024 national budget, the Finance, Economic Development and Investment Promotion ministry introduced a wealth tax whereby any owner of a property valued at a minimum of US$100 000 is subject to 1% tax starting next year. It is believed that the tax will be an annual charge to be paid over a 12-month period.
However, research shows that most properties worth US$100 000 were bought for between US$40 000 and US$50 000 and only gained in value over the years.
This leaves the majority of current owners as either pensioners or inheritors of deceased estates who are not high-income earners, hence increased calls to raise the taxable property value from US$100 000.
“I really welcome public debate on the various taxes that we proposed. That is, when we have proposals, we expect the public to make these, sometimes, very vigorous arguments which is a good thing. Secondly, Zimbabwe is not the first country to propose a wealth tax. Other countries are implementing (it),” Finance, Economic Development and Investment Promotion minister Mthuli Ncube told NewsDay Business in an interview on Wednesday.
“If you look at France, Switzerland, Columbia, Norway and Spain they have some wealth tax. I think ours is closest to France which is linked directly to property. Why? Because it is just simple. Otherwise, we will have to go into people’s bank accounts to find out how much you have, if your kids go to private schools, how many cars do you own and a whole kind of lifestyle audit to get someone’s wealth.”
He continued: “What size of house do you own? How many houses do you own? We just made it very simple and simplified it to property. But now, the threshold. We actually welcome the public’s reaction that the threshold needs to be changed. We are going to raise it.”
Ncube could not give the new threshold as it will depend on the debate that takes place in Parliament.
“What we are having are consultations for now, but we are also convinced that the threshold ought to be raised so that we don’t end up taxing the lower to middle income citizens we are fully aware of,” he said.
In other countries, however, the wealth tax looks at high income brackets and the totality of assets owned by those individuals which includes stocks, cars, houses, bank account balances and company shares.
But, Ncube said Treasury would not follow suit as it would “complicate our lives”.
“No, we won’t. It will just complicate our lives. It is cleaner to focus on property because chances are that if someone can afford five cars, chances are they have a second house and a third house of invested property. So, property is a very good leading indicator of someone’s wealth,” he said.
“We have to get the level right and that is the issue that the public is raising which we feel we will fully take on board.”
However, experts have warned that complications may arise from how the property valuations will be done, that the properties do not generate income and the fact that while owners aged 70 and over are exempt, the retirement age is 65.
This means pensioners who are receiving a paltry pension will be subject to the tax.
Rentals are expected to be raised by owners of properties living outside Zimbabwe.
“The minister will make regulations which will specify and prescribe implementation modalities. This is as per the Finance Bill that is being tabled,” a ministry insider told NewsDay Business yesterday.