THE Confederation of Zimbabwe Industries (CZI) has criticised the government’s refusal to scrap the Intermediated Money Transfer Tax (IMTT), despite warning that the levy is now undermining production, investment and the overall competitiveness of formal businesses.
In presenting last week’s 2026 National Budget, Finance, Economic Development and Investment Promotion minister Mthuli Ncube decided to keep the tax head, despite mounting calls for it to be scrapped.
Instead, the minister reduced the IMTT rate on ZiG-denominated transactions to 1,5%, from 2%, and kept it at 2% for forex transfers.
In a position paper released last week, CZI said that although the IMTT has provided a convenient short-term revenue source, its cumulative impact on formal businesses, electronic transactions, and multi-stage value chains is “now making conditions increasingly difficult for production, investment and competitiveness”.
“We support a tax system that is growth-enhancing, encourages formalisation and digitalisation, and strengthens Zimbabwe’s competitiveness, while maintaining the fiscal space needed for government priorities.”
IMTT was introduced in October 2018 and has become a permanent feature of the tax mix, with growing weight on formal electronic transactions.
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“From a productive-sector perspective, this has created several unintended effects that we believe now need to be addressed,” CZI said.
IMTT is charged on the full value of each electronic transfer at every stage of the value chain. The same underlying value is therefore taxed multiple times as it moves from supplier to manufacturer, to wholesaler, retailer, and finally to the consumer. Because IMTT is not creditable or refundable (including on exports), it becomes a permanent cost embedded at each stage.”
CZI said for multi-stage manufacturing and distribution, this resembles a cumulative turnover tax rather than a tax on income or value added, and can work against the objective of deepening domestic value addition.
“IMTT applies at a flat rate regardless of profitability or cash-flow position. It is payable even where firms are making losses,” CZI said.
“This is particularly challenging for low-margin formal businesses, where the levy comes directly out of working capital. In this sense, IMTT does not adjust to economic conditions at the firm level and can amplify stress in periods of tight liquidity.”
This is especially true as the formal economy has shrunk to 23,9%, from 40%, this year, with all major economic activities now occurring in the informal sector.
“IMTT falls primarily on formal electronic transactions; many cash and informal transactions fall outside its reach. The rational response for some firms and households is to reduce use of the banking system and digital platforms to limit the tax,” CZI said.
“Over time, this weakens financial intermediation, slows progress on digital payments, and narrows the visible tax base. This is at odds with national objectives around financial inclusion, digitalisation, and building a broader, more traceable tax base.”
CZI noted that in a high-cost environment, the cumulative effect of IMTT on all electronic payments in a value chain raises unit costs.
“Exporters cannot recover IMTT; it cannot be zero-rated or claimed back, so it is fully embedded in export prices,” CZI said, adding that this erodes margins and weakens the price competitiveness of Zimbabwean products in regional and global markets.
“Given the emphasis on industrialisation and export-led growth under the National Development Strategy, this is a concern for the productive sectors.”
CZI said that at this stage of Zimbabwe’s development, the costs of IMTT to formalisation, investment and competitiveness significantly outweighed its benefits as a convenient revenue instrument.
“We therefore see its removal in this budget cycle as an important step in the next phase of tax and industrial policy reform,” CZI said.