This is to meet the government’s election manifesto
Prepare to have additional savings of up to Nu 10,000 a year as this Parliament session will see the government introducing Personal Income Tax changes that will basically mean that the first Nu 200,000 from your annual income will no longer be taxed.
Currently, only the first Nu 100,000 of your annual income is exempt from tax while 10 percent tax has to be paid from Nu 100,001 to Nu 250,000 and so on.
So since another 100,000 is being exempt from the 10 percent tax the direct savings will be up to Nu 10,000 depending on the income levels.
There will be even more savings for parents educating their children as the current Nu 50,000 Education Allowance deduction will now be tripled to Nu 150,000. This will mean that once the tax reforms are passed in Parliament up to Nu 150,000 can be tax exempt for parents educating children.
The government’s tax reduction moves are in line with the People’s Democratic Party’s (PDP) 2013 General Election manifesto which said, “We will raise the annual tax deductable income from Nu 100,000 to Nu 200,000. We will raise the limit for deduction on education spending from Nu 50,000 to Nu 150,000.”
The move is a measure to reduce the growing income gap between the rich and poor especially in the face of inflation.
Many lower income families under the new system will no longer have to pay any PIT while middle income families will see a significant reduction in the Tax burden.
The tripling of the education allowance deduction is to reduce the burden on parents for educating their children and also to demonstrate the government’s commitment to education.
Currently apart from the 10 percent tax on 100,001 to Nu 250,000 there is a progressive 15 percent tax from Nu 250,001 to 500,000, 20 percent tax on 500,001 to 1,00,000 and a 25 percent tax for anything above Nu 1 mn.
The National Council in the past had also recommended increasing the tax exemption slab from Nu 100,000 to Nu 200,000 in the face of a growing wealth divide.