ZIMBABWE’S tax collection agency granted tax concessions worth about US$10 billion last year as authorities intensified efforts to promote investment, stimulate economic activity and address market failures, according to the Zimbabwe Revenue Authority (Zimra).
However, Zimra’s concessions exceeded the US$7,65 billion collected during the same period, highlighting the enormous fiscal cost of incentives deployed to support an economy battered by heavy informalisation and mounting competition for investment from regional peers.
“In 2025, a total of ZiG269,60 billion was granted as tax expenditures (previously referred to as revenue foregone) and these consisted of ZiG239,09 billion from VAT on local sales, ZiG24,75 billion from customs duty and ZiG5,76 billion from VAT on imports,” Zimra said in its 2025 annual report.
“Tax expenditures constituted 76,52% of potential revenue from VAT and customs duty,” Zimra noted.
Tax expenditures — reductions in tax liabilities granted through concessions, exemptions, allowances, credits and preferential rates — are designed to attract investment, stimulate economic activity and address market failures.
But the disclosures have also raised questions about whether Zimbabwe is receiving adequate returns from what authorities view as one of the region’s most generous investment incentive regimes.
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The ZiG269,60 billion is equivalent to about US$10,38 billion when translated at an exchange rate of US$1:ZiG25,98 as at December 31, 2025.
The figure is particularly striking when compared to actual investment inflows of about US$1,55 billion, which flowed into the economy during the period, according to Zimbabwe Investment and Development Agency data.
Zimbabwe has spent years positioning itself as one of Africa’s most attractive investment destinations, offering a range of incentives targeting strategic sectors.
Competition for foreign capital has intensified across southern Africa as global demand for critical minerals and strategic resources continues to surge, prompting governments to deploy aggressive packages to attract investors.
Zimra said the relationship between economic growth and tax revenue was not always straightforward.
“The projected economic growth for 2025 was expected to be driven by the agriculture (24%), mining (7,3%) and manufacturing (4,2%) sectors,” the report said.
“Notwithstanding this performance, it is important to note that a sector’s contribution to gross domestic product does not necessarily translate into a commensurate increase in tax revenue.
“This divergence may be attributed, in part, to the provision of tax incentives designed to attract investment, stimulate economic activity and promote employment creation.”
The findings emerged as Zimra battled rising taxpayer indebtedness.
Net tax debt increased by 35,53% to ZiG31,15 billion last year, reflecting intensified audits, investigations and compliance enforcement measures.
VAT debt more than doubled to ZiG15,88 billion, while Pay-As-You-Earn arrears rose from ZiG1,61 billion to ZiG3,27 billion. Corporate income tax debt climbed nearly 60% to ZiG10,19 billion.
Zimra said tax evasion, non-compliance and the expansion of the informal sector were among the biggest threats to revenue mobilisation.
“The past few years have seen tremendous growth in the informal sector, where many businesses operate outside formal regulatory frameworks,” the authority said.
“These enterprises often conduct transactions in cash, maintain limited or no records, and avoid official registration, making it difficult to tax and monitor their activities.”
Zimra exceeded annual revenue targets by 16,36%, collecting ZiG224,81 billion against a target of ZiG193,21 billion.
Zimra did not respond to questions seeking further clarification.