TREASURY has been forced to retreat on the proposed 2026 tax measures after intense pressure from legislators and business groups, but critics say the reversal largely favours capital and investment, leaving low-income earners exposed to a rising cost of living.
Finance minister Mthuli Ncube reversed or deferred several controversial tax proposals after a marathon parliamentary sitting last Wednesday that stretched past midnight, during which MPs warned the measures will stifle economic activity in a fragile economy.
While Treasury retreated on taxes affecting investment and offshore financing, economists argue that the revised package offers little relief to workers and the poor, who continue to face stagnant wages, indirect tax pressures and an unchanged low-income tax-free threshold.
Among the measures proposed in the 2026 National Budget were a 0,5 percentage-point increase in value-added tax (Vat) to 15,5%, the introduction of a 15% digital services withholding tax on offshore platforms and a tiered royalty on gold, whereby a gold price above US$2 500 attracted a royalty of 10%.
Treasury also proposed reducing the intermediated money transfer tax (IMTT) on ZiG transactions to 1,5% from 2%, while retaining the 2% rate on United States dollar transfers.
The ruling Zanu PF party resolved at its annual national people’s conference that IMTT must be scrapped because it fuelled informalisation and worked against plans to formalise the billion-dollar informal sector.
Keep Reading
- Fresh delays to pharmaceutical sector bailout
- Record education budget fails to quell crisis, say teachers
- ‘Budget skirts workers’ issues’
- Economists slam 2026 budget as tax grab that offers ‘no real relief’
Customs duty on cotton was also set to rise sharply, signalling higher statutory costs for firms operating in the sector from 2026.
The proposals were introduced as Treasury sought to mobilise an additional US$1,47 billion in revenue in 2026, on top of the US$7,93 billion expected to be collected this year.
During a heated parliamentary session last week on Wednesday that ended past midnight, Ncube came under heavy criticism for piling new taxes starting in 2026 when the economy remains in the doldrums.
Following sustained criticism, Ncube reversed several proposals, including a planned overhaul of the gold royalty regime. Treasury had proposed a tiered royalty structure, under which gold prices below US$1 200 per ounce would attract a 3% royalty, prices between US$1 201 and US$5 000 would be taxed at 5% and prices above US$5 000 would attract a 10% royalty.
“With effect from the 1st of January 2026, the schedule of Chapter 7 of the Finance Act [Chapter 23:04] is amended in the part fixing the rates of royalties which fixes the rates of royalties for section 36 of the Income Tax Act [Chapter 23:06] by the repeal of the term gold produced by other miners and the substitution of the following:
“Gold producers by other miners, 3% if the gold produced by them is sold at a time when its price is below US$1 200 per ounce. Then 5% if the gold produced by them is sold at a time when its price is above US$1 200 but below US$5 000 per ounce. Finally, 10% if the gold produced by them is sold at a time when its price is above US$5 000 per ounce,” Ncube said.
Ncube has also scrapped cash withdrawal levies, which would have imposed charges of up to 3% on large cash withdrawals by individuals and corporates.
In the 2026 National Budget, Treasury imposed new cash levies of 0% on individuals withdrawing US$1 to US$500 and corporates withdrawing US$1 to
US$5 000; 2% on individuals withdrawing US$501 to US$1 000 and corporates withdrawing US$5 001 to US$10 000; and 3% on individuals withdrawing above US$1 001 and corporates US$10 001.
The minister had also proposed increasing the strategic reserve levy at the rate of 0,187 United States cents per litre of diesel and 0,247 for petrol, which would raise fuel prices.
Ncube on Wednesday requested the matter be deferred, saying he wanted to “consult on something that I want to be clear about”.
Lawmakers also pushed Treasury to review the rental income tax, initially proposed at 25% in the 2025 National Budget and followed by a proposed 10% withholding tax in 2026.
After the debate, Ncube conceded the rate was too high.
He clarified that the tax will apply only to landlords letting property for business or commercial purposes, not residential rentals.
Another major reversal concerned the proposed reinstatement of a 15% withholding tax on interest income paid to non-residents, while maintaining exemptions for loans extended to central government. Treasury dropped the measure after warnings that it can deter offshore lending at a time when
the domestic market is capital-starved.
“This could have an unintended consequence of increasing interest rates, as lenders will pass on the cost of the tax to borrowers,” Ncube said.
“This could have an unintended consequence of increasing interest rates as lenders will pass on the cost of the tax to the borrowers,” Ncube said.
“That is what we want, but we also want to encourage our businesspeople to source offshore loans. These taxes may just discourage the supply of these offshore loans, so they should be repealed.”
On Vat, Ncube defended the proposed rate increase by pointing to exemptions on basic commodities consumed by low-income households. These include bread, cooking oil, salt, milk, sugar, vegetables, maize meal, wheat flour, sanitary wear, fertiliser, medicines, agricultural inputs, domestic electricity, water, fuel,
LPG gas and road toll fees, among others.
Vat is an indirect tax on consumption, charged on the supply of taxable goods and services. Its increase pushes up prices, thereby reducing disposable incomes.
Economists have dismissed the exemptions on basic commodities as insufficient, arguing they do not cover the full basket of goods required by households.
They also note that with the income tax-free threshold remaining at US$100 — despite calls by legislators to raise it to US$500 and its ZiG equivalent — disposable incomes will remain under pressure, eroding any marginal gains derived from Vat exemptions.
Ncube rejected calls to adjust tax bands, citing easing inflation.
“Then, on the issue of tax brackets, usually we make these adjustments, a proposal in tax brackets when inflation is on the rise, but what we are experiencing is a downward trend in inflation. We expect annual inflation actually to be single digit at the end of the first quarter next year and so will USD inflation,” he said.
“We have no reason to adjust bands at this stage, but of course shocks can happen, they can occur and we always have an opportunity to review things during the Mid-term Budget in July, which will be July 2026.”
With wages stagnant and several cost-raising measures still intact, economists warn that 2026 risks deepening pressure on both businesses and households, with the poorest bearing the heaviest burden.