Andrew
Kuda Bwititi
Chief Reporter
Treasury has released more funds to hard-pressed workers by reviewing the tax-free threshold to $5000, up from the previous $2 000, as it tries to deal with rising inflation, which has eroded disposable incomes, and the fallout from the Covid-19 pandemic.
In a Mid-Year Budget Review Statement announced Thursday, Finance and Economic Development Minister Professor Mthuli Ncube also announced year-long tax exemptions – which would be effective from April 2020 – to risk allowances for frontline workers fighting the coronavirus.
Overall, the local economy is expected to shrink to minus 4,5 percent this year from the initial forecast of 3 percent.
It is, however, projected to strongly rebound to 7 percent next year.
There were also relief measures for the private sector in the form of corporate tax credits of up to 50 percent expenditure to enable businesses “to have funds which can be invested back to boost the working capital in order to sustain operations”.
Other tax interventions include increasing the Intermediated Money Transfer (IMT) tax-free threshold for local currency transactions from $100 to $300, which will release more funds to the transacting public, while the maximum tax payable per transaction by corporates was also reviewed from $25 000 to $50 000 on transactions with values exceeding $2,5 million.
There is also now a maximum tax of US$2 000 for foreign currency transactions with a value exceeding US$100 000.
On the economy, Professor Ncube said: “In the absence of a stimulus package, the economy contracted severely, -4,5 percent growth in 2020 as opposed to 3 percent initially projected.
“Economy will recover 7,4 percent in 2021, and around 5 percent in 2022.”
Mining, he added, will surpass agriculture as the largest foreign-currency earner.
“The mining sector, being the largest foreign-currency earner (60 percent of total foreign currency) is poised to surpass agriculture, which currently contributes between 9-10 percent to GDP. Currently, mining sector contributes about 8 percent of total GDP and has set a target of generating US$12 billion revenues by 2023 from as little as US$2,7 billion in 2017.”
Of the Government’s request of US$300 million to support ongoing response efforts to fight the disease, development partners have since pledged US$202,6 million, of which US$26,9 million has already been paid out.
Minister Ncube said the forex availed to the foreign currency auction system is being channelled largely towards manufacturing and machinery.
HIGHLIGHTS
>Total social protection amounted to $992 million by June 2020. Other social interventions include BEAM, drought mitigation, harmonised cash transfer
>US deposits at US$1,2 billion – probably the highest in the last 15 years.
>Current account to remain in surplus in 2020 at US$1,2 billion mainly driven by secondary income and goods account. An improvement from US$921 million recorded in 2019. The anticipated surplus is also on account of measures on containing nonessential consumptive imports.
>For the 2020/21 Summer Cropping Programme, Government is continuing the guarantee arrangement with the financial sector. The financial sector is expected to target highly productive farmers in irrigated and highly productive areas for the following crops:
- Dryland maize (150 000ha); • Irrigated maize (80 000ha); • Traditional grains (50 000ha); and • Soyabeans (60 000ha).
>Relative improvement in electricity generation during the first quarter of 2020 compared to the last quarter of 2019, with total electricity generated amounting to 1 294 GW/h, up from 1 226 GW/h. The improved generation combined with consistent imports resulted in reduced load-shedding.
>Scale-up of support for Harmonised Social Cash Transfers to food-poor and labour-constrained households in 23 poorest districts of the country to about 63 000 households.
> Total public and publicly guaranteed (PPG) external debt stood at US$8,1 billion as at end December 2019. Multilateral development banks (MDBs) are owed a total of US$2,6 billion (32 percent of the total PPG external debt), of which the World Bank Group is owed US$1,5 billion, the African Development Bank US$705 million, European Investment Bank US$330 million and other multilaterals US$66 million.
Online Reporter