AXCENTIUM Zimbabwe (Axcentium) says the increase in the Value Added Tax (VAT) rate to 15,5% and the continued use of the Intermediated Money Transfer Tax (IMTT) will weigh heavily on the competitiveness of local businesses, despite marginal adjustments announced in the 2026 national budget.
In the budget, government reduced the IMTT on ZiG-denominated transactions to 1,5% from 2%, while maintaining the 2% rate on foreign currency transfers.
VAT, however, was increased by 0,5 percentage points to 15,5% with effect from January 1, 2026.
As earlier reported, the tax changes form part of government’s plan to mobilise an additional US$1,47 billion next year, pushing total 2026 revenue collections to a projected US$9,4 billion, up from an estimated US$7,93 billion this year.
Since the budget’s release, economists, business groups and market watchers have criticised the new measures as growth-restrictive and counterproductive for an economy already battling high costs and weak consumer demand.
Presenting a position paper during a breakfast meeting on Monday, Axcentium, a professional services firm, said the VAT hike presents immediate risks for both firms and consumers.
“Immediate revenue: boost to the fiscus as VAT is collected upfront; Increased costs: Businesses have a choice to absorb the cost or pass it on to consumers,” Axcentium explained.
“As a result of the increase, businesses in Zimbabwe become less competitive to neighbouring countries. Case in point, South Africa VAT rate is 15%, Botswana VAT rate is 14%.”
The firm also warned that higher VAT will likely shift spending patterns.
“Changed consumer habits: Due to increased prices, consumers may seek cheaper alternatives from informal markets to manage strained budgets. This result in lost revenue for the government,” it said.
Analysts say the VAT increase risks deepening the cost-of-living crisis, with the tax applying broadly across goods and services at a time when wages have barely moved and inflationary pressures persist.
Even a small increase, they note, reduces disposable incomes, weakens purchasing power and forces households to cut back on essentials.
The result may be weaker consumption, slower growth and further informalisation.
These concerns mirror findings from the Zimbabwe Tax Perception Survey 2025, which revealed that nearly nine in 10 Zimbabweans feel the current tax burden no longer matches their ability to pay.
Turning to the IMTT, Axcentium said Zimbabwe stands out in the region.
“We note countries, such as South Africa, Zambia and Botswana, do not have IMTT embedded in their tax framework,” it said.
“They have some aspects of digital services tax but not IMMT. The proposal to reduce IMTT can be a growth-oriented reform as it lowers transaction costs, promotes digital payments and supports competitiveness.”
However, Axcentium noted that IMTT still constrains business liquidity and that the benefit of the ZiG reduction may be overshadowed by the VAT hike, which applies in both currencies.
The firm said Zimbabwe’s tax system should strike a balance between revenue mobilisation and a business-friendly environment that attracts investment.
Its concerns align with findings from the World Bank, whose latest Zimbabwe Economic Update, Fostering a Business-Enabling Regulatory Environment for Private Sector Growth, concluded that excessive regulation and rising compliance burdens are constraining private sector activity.
“Higher costs and reduced competitiveness: The requirement to navigate complex licensing, registration, and tax procedures, as well as lengthy time-to-compliance, imposes both direct and indirect costs on firms,” World Bank said in its recent Economic Update on Zimbabwe.
“Direct costs include fees and payments, while indirect costs include the opportunity cost of time spent on paperwork and seeking legal advice.
“For example, a heavy regulatory burden relating to starting a business, paying taxes, and trading across borders has been empirically shown to significantly and negatively impact economic growth,” it said.
These costs, the bank said, are especially onerous for small to medium enterprises and startups, which lack the financial and administrative capacity of larger firms.
