THE Zimbabwe National Chamber of Commerce (ZNCC) has raised renewed concern over the proposed 0,5% increase in value-added tax (VAT) to 15,5%, warning that the move will trigger inflationary pass-through effects on households and businesses.
The business member organisation said the increase, proposed in the 2026 National Budget, comes at a time when firms are already struggling with rising operational costs and weakening consumer demand, driven by the continued rise in the cost of living.
ZNCC cautioned that companies would have little choice but to pass the higher tax burden onto consumers, further eroding household purchasing power and slowing overall economic activity.
This creates an inflationary ripple effect, as households face higher prices across the board while firms contend with increased input costs, amplifying overall price pressures in the economy.
“Increasing VAT by 0,5% broadens the inflationary pass-through to households and firms and risks reversing tentative gains in disinflation… VAT remains the largest single tax contributor. The main revenue heads in 2025 are VAT at 23,7% of total revenue, personal income tax at 19,3%, excise at 11,5%, corporate tax at 11,2% and customs duties at 6,9%,” ZNCC said in a post-2026 National Budget analysis.
“A VAT rate increase of 0,5 percentage points will mechanically raise VAT collections, but the amount raised will be concentrated on final consumers and disproportionately felt by low- and middle-income households.”
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According to ZNCC, October 2025 data show tentative improvement in headline inflation but persistent currency-driven pressures.
The warning comes despite findings from the Zimbabwe Tax Perception Survey 2025, conducted by the Zimbabwe Taxpayers Platform, which revealed that nearly nine out of 10 Zimbabweans believe the tax burden no longer matches their ability to pay.
“Month-on-month ZiG inflation was negative in October, as depicted on, while USD monthly inflation remained positive. Annual inflation is still elevated: ZiG year-on-year was 82,7% in September and USD year-on-year was 13% percent in October,” ZNCC said.
“The weighted annual inflation eased from 25,1% in September to 16,8% in October. With this fragile disinflation path, a VAT increase is strongly inflationary because VAT hits the final retail price and will be passed through rapidly in a dollarised economy. The regressive nature of VAT means poorer households lose more purchasing power.”
The ZiG annual inflation rate dropped to 19% in November from 32,7% in October, as the greenback counterpart remained elevated at 13,1%, suggesting that currency and statistical effects — rather than genuine price stability — were driving the apparent improvements.
Economists said the divergence highlights deep-seated structural challenges that fiscal and monetary authorities must address, particularly in light of the Reserve Bank of Zimbabwe’s tight management of the exchange rate.
IH Securities said that while government efforts to enforce fiscal discipline and close revenue leakages are positive, the broader tax environment has become less business-friendly.
“Liberalisation of gold trading should boost formalisation, though higher royalties will affect post-tax earnings for large-scale miners. Inflation is projected to fall to single digits by 2026, but the VAT increase is likely to be passed on to consumers, weighing on volumes and adding mild inflationary pressure,” it said.
The VAT increase comes as the Treasury seeks to raise an additional US$1,47 billion in 2026, targeting total revenue of US$9,4 billion, up from an expected US$7,93 billion this year.