FINANCE, Economic Development and Investment Promotion minister Mthuli Ncube will tomorrow present the 2026 National Budget amid a clamour for tax relief.
The clamour comes as a new survey by the Zimbabwe Taxpayers Platform shows that nine out of 10 citizens say the tax burden no longer matches their ability to pay.
The budget comes after the government rolled out a raft of reforms on the ease of doing business.
There were wholesale reviews on licences and permits as President Emmerson Mnangagwa’s administration moves to create a conducive environment for business.
It is hoped that the reforms will increase domestic investment through expansion programmes.
The reforms are also projected to lure foreign direct investments in line with the administration’s campaign, Zimbabwe is open for business.
Individuals and firms have been singing the same hymn: “We can't breathe due to over-taxation.”
The government says the levels of taxation are necessary to raise revenue to meet the country’s growing needs.
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However, there are concerns that the tax regime punishes the compliant, while giving a wide berth to the informal sector, where king cash rules the roost.
Experts say the high taxes have worked against plans to accelerate the formalisation of the informal sector.
At the centre of public frustration is the controversial intermediated money transfer tax (IMTT), introduced in 2018 to expand the tax base.
The tax on electronic transfers has been roundly condemned by firms and individuals, including the ruling Zanu PF party. The party’s national people’s conference last month resolved that the tax head must go.
Ncube has insisted that the tax is necessary to marshal resources required to meet government’s daily requirements and other obligations.
He has, however, hinted at a possible reduction in the tax, with the gap being offset by an increase in value-added tax (Vat) from the current 15%.
An indirect consumption tax, Vat, is charged on the supply of taxable goods and services. An increase in this tax head affects the final consumer.
Zimbabwe’s 15% rate mirrors South Africa’s, while Zambia and Mozambique charge 16% and Malawi recently raised Vat by one percentage point to 17,5%.
But raising Vat risks pushing up the cost of living at a time when authorities are trying to contain inflation and stabilise the Zimbabwe Gold currency.
There are also calls for the Treasury to be transparent on new tax heads, including how much has been collected from the sugar tax and the 0,5% fast-food tax and how these funds have been used.
Ncube must balance the need to raise revenue and economic growth. Already, lawmakers, who hold veto power by virtue of passing the budget, have indicated that they want more trinkets at a time when the government is emphasising fiscal discipline.
Zimbabwe’s US$23 publicly guaranteed debt remains an elephant in the room.
The external debt has cut the country off multilateral lenders, while the US$8,8 billion domestic debt as at end of June severely limits further borrowing without crowding out the private sector.
With limited external support, Zimbabwe must look inwards. The solution lies in finding an effective mechanism to tap into the informal sector and broaden the tax base.
