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Zimbabwe Cuts Taxes for Lower-Income Workers - 2004-07-27

Zimbabwe has dramatically reduced taxes for workers at the bottom of the economic ladder. The move is aimed at helping lower-paid workers to cope with high inflation.

On Harare's streets, people were talking happily about their sudden good fortune.

Now only those earning at least US $130 a month will pay tax as of September 1. Until now workers with incomes as low as US $35 a month paid tax.

The Zimbabwe Congress of Trade Unions has been campaigning for more than a year for the threshold to be raised. It says families need about US $200 US a month to survive.

Acting Finance Minister Herbert Murerwa presented a mini budget as high inflation continues to impoverish wage earners and job losses soar.

A messenger in central Harare says his life would change overnight when he no longer had to pay tax on his salary.

An off-duty security guard said he had not heard the news, but found it hard to believe that he would no longer see income tax deductions on his salary. He said he sent his family back to his rural home in April because he could no longer afford to pay rent in the capital. He said it was cheaper for him to share a room with other workers than rent space for his wife and three children.

Although the government says inflation has dropped from the highs of more than 600 percent last year, to below 400 percent now. The price of such basics as food and rent continue to rise.

Many companies say rising costs of rental space have forced them to cut their staffs.

Ordinary people on the streets say they do not see any evidence of the government's claims that the rate of the price increases is slowing down.

Central bank governor Gideon Gono has also announced new policies, and devalued the Zimbabwe dollar for those in the diaspora wanting to send hard currency home to their families.