HARARE – Zimbabwe’s biggest labour movement has called on the government to slash income tax by 25 percentage points to help struggling workers and inspire confidence it is committed to tackling poverty affecting more than 70 percent of the population.

The birth in February last year of a new compromise government between President Robert Mugabe and Prime Minister Morgan Tsvangirai eased political tensions and helped stablise the economy. But conditions have remained dire for workers and other ordinary citizens.

In proposals to Finance Minister Tendai Biti ahead of his mid-term budget statement tomorrow, the Zimbabwe Congress of Trade Unions (ZCTU) complained bitterly that poor workers continued to be taxed higher than rich corporates and that the tax-free threshold remained almost five times lower than the poverty datum line or bread line.

“While corporate tax has been reduced from 30 percent to 25 percent, individuals will be taxed at a punitive maximum rate of 35 percent, down a little from 37,5 percent,” said the union that called for a pro-poor budget and a lowering of worker tax to 10 percent.

The ZCTU added: “This (higher personal tax and lower corporate tax) is unfair, since companies are in business to make profits, and most of their expenditures are tax-deductible. Individuals, on the other hand, earn wages and salaries to make a living, not for profit.”

The union that said lower taxes across the board were key to attracting investment urged the government to bring up the tax-free threshold for workers, at the moment pegged at US$160, to match or closer to the breadline which is estimated at around at US$500.

Zimbabwe is one of the world’s highest taxed nations. But the Harare administration that has failed to win financial backing from rich Western nations and says it is already using up to 60 percent of collected revenue on wages cannot afford any tax cuts -- at least for now.

The government says it requires at least US$10 billion to restore basic services and get Zimbabwe working again.

But it has attracted little international support beyond strictly humanitarian aid with multi-lateral lenders demanding repayment of outstanding debt before new loans can be given.

On the hand, rich Western nations able to provide required grants and soft loans are reluctant to fund the administration directly, insisting Harare must first step up the pace of democratic reforms, do more to uphold human rights and the rule of law before they give support.

By Zimonline