Jonathan Hore
It is interesting to note that once a tax change intention is announced, some take the announcement as if it was law. Well, that is common because the changes to laws are rather technical and need those who deal with them to shed more light on the changes, which is what I will right away do here today. The purpose of this article is to let you know that there are intentions to change the PAYE or Personal Income Tax (PIT) rates and
that the change is not yet law. The former Minister of Finance and Economic Development, Dr Thapelo Matsheka, proposed to increase PAYE/PIT rates from the current P36 000 per annum to P48 000 through an Income Tax Amendment Bill 2021 which is understood to have since been debated and endorsed by Parliament.
In this article, words importing the masculine shall be deemed to include the feminine.
PAYE and PIT brief PAYE is a tax paid by employees on remuneration stemming from an employment arrangement. Personal Income Tax, on the other hand, is personal tax that is
payable by individuals who, in most instances, are self-employed such as lawyers and accountants who run other businesses as sole traders. Having laid the background, let me now get to details of the new tax tables.
Change happens 1.07.21
The bill is set to become law as of 1 July 2021 and its key feature is to exempt individuals who earn P4 000 or less per month from tax. There had been calls by many tax practitioners to increase this threshold in previous years as it had been overtaken by inflation. For your information, that threshold had last been adjusted in 2011.
No tax on 1st P4 000 Whilst this new proposed law completely obliterates tax for persons earning not more than P4 000 per month, it also reduces tax for those who earn above the said exempt threshold. As an example, a person who earns P12 000 per month currently pays P1 087.50 as tax per month but will pay P900 effective 1 July 2021, saving P187.50. High income earners will also pay less tax due to the said change. For instance, a person who earns P100 000 per month currently pays P 23087.50 but will pay P22 837.50,
realising a drop in monthly tax of P250.
Whilst this may not be much, it will slightly cushion taxpayers from the price adjustments linked to other tax increases.
New PAYE/PIT rates
PAYE/PIT rates are best done in the form of a table, but that is not so friendly to this type of article. However, that will not stop Yours Truly from giving you the new changes. So, any income between P4 000 and P 7 000 per month will be taxed at 5% whilst that between P7 001 and P10 000 will be taxed at 12.5%. Income between P10 001 and P13 000 per month will suffer tax at 18.75% whilst 25% will apply on monthly income in excess of P13 000.
Law in waiting
I plead with you to note that the PAYE and PIT rates have not yet changed as the law is yet to be gazetted. Therefore, no one must suggest that Yours Truly said that the new rates have already taken effect.
Well, folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to Caesar.
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This article is of a general nature and is not meant to address particular matters of any person. Tax consulting is advised if decisions are to be made.
Jonathan Hore is a Managing Tax Consultant at Aupracon Tax Specialists and feedback may be relayed to jhore@aupracontax.co.bw or 71 81 58 36.