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Mthuli Ncube under pressure to ease tax burden
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Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube is facing mounting pressure from business leaders and economists to overhaul Zimbabwe's tax regime, with demands for cuts in taxes and reductions in the cost of doing business ahead of the 2025 Mid-Term Budget Review, expected in the coming weeks.
At the centre of the growing discontent is the controversial 2% Intermediated Money Transfer Tax (IMTT), which has long drawn criticism for penalising formal transactions and discouraging economic participation in the formal sector. Business leaders are also calling for a revision of the personal income tax-free threshold, a streamlining of regulatory fees, and a more coherent fiscal strategy to address deepening macroeconomic challenges.
Zimbabwe's economic environment is growing increasingly fragile, with companies shutting down, mass retrenchments underway, weakening consumer demand, and trade imbalances widening.
"The tax environment has become uncompetitive and unsustainable," the CEO Africa Roundtable (ART) said in its budget submission. "Businesses face more than 50 different taxes and regulatory costs. The cumulative burden, including the IMTT, drives the effective tax rate above 40%. This is discouraging compliance and undermining investor confidence."
The ART called for the complete scrapping of the IMTT and a rise in the tax-free income threshold to improve consumer spending power and ease pressures on business.
Economist Trust Chikohora echoed these sentiments, warning that over-taxation was strangling productivity. "There are too many taxes in Zimbabwe. The IMTT is imposed on top of income tax, VAT, PAYE and other levies - it's effectively a penalty for conducting formal business," he said. "At the very least, government should make it tax-deductible and raise the tax-free threshold to around US$200."
Chikohora also warned that duplicative regulatory fees and licensing burdens were forcing small and medium enterprises into informality, further shrinking the tax base.
Despite the calls, some analysts argue that Prof Ncube may have limited fiscal space to deliver sweeping reforms. "The Mid-Term Budget Review is more likely to signal policy intent rather than introduce structural changes," said economist Dr Prosper Chitambara. "The government still depends on taxes like the IMTT to fund operations, and any tax relief may only come in the full 2026 Budget."
Nonetheless, many economists insist that sustainable recovery lies in expanding the tax base, especially through the formalisation of the informal sector, rather than burdening compliant businesses.
Economist Malone Gwadu said cutting business costs was essential to incentivise formalisation. "There must be targeted support for productive sectors. Treasury should consider fee holidays for miners, support for manufacturers, and incentives for agriculture - especially after this year's improved harvest," he said.
These calls come as Zimbabwe implements the Zimbabwe Gold (ZiG) currency introduced earlier this year. The IMF recently endorsed the ZiG as a potential anchor of stability, conditional on strict fiscal discipline, adequate reserves, and institutional reforms. Despite this, the US dollar remains the preferred currency for transactions and government tenders.
Business leaders have also urged the Treasury to revise foreign currency surrender requirements, which currently mandate exporters to liquidate 30% of their proceeds into ZiG at the official exchange rate. The ART said the measure erodes export profits and reduces investment appeal. "Surrender thresholds must be reduced, and ZiG disbursements must be timely," it noted.
Illicit trade is also hurting exporters. Smuggling through porous borders is estimated to cost Zimbabwe between US$500 million and US$1 billion annually, with counterfeit goods displacing local products and undermining job creation.
Concerns are rising in the mining sector, which contributes 83% of export earnings and 73% of foreign direct investment, over possible new taxes under discussion. Industry players warn that uncertainty could deter future investment. "Mining taxation must be predictable and consistent," said a senior executive from the Chamber of Mines. "Zimbabwe's growing tilt toward resource nationalism, if not carefully managed, could scare off long-term capital."
ZimTrade board member Josephine Takundwa added that reducing production costs should be a priority. "Labour costs account for over 35% of production costs, largely due to dollarisation. While tax abolition may be unrealistic in the short term, a phased withdrawal of the IMTT would be a positive start," she said.
Takundwa called for improved logistics, trade facilitation, and support for value chains to drive competitiveness.
As Zimbabwe grapples with business closures, shrinking incomes and weakening public trust, all eyes are on Professor Ncube's Mid-Term Budget Review. Business leaders and economists alike are hoping it will deliver more than rhetoric - and outline a clear path to economic recovery and reform.
At the centre of the growing discontent is the controversial 2% Intermediated Money Transfer Tax (IMTT), which has long drawn criticism for penalising formal transactions and discouraging economic participation in the formal sector. Business leaders are also calling for a revision of the personal income tax-free threshold, a streamlining of regulatory fees, and a more coherent fiscal strategy to address deepening macroeconomic challenges.
Zimbabwe's economic environment is growing increasingly fragile, with companies shutting down, mass retrenchments underway, weakening consumer demand, and trade imbalances widening.
"The tax environment has become uncompetitive and unsustainable," the CEO Africa Roundtable (ART) said in its budget submission. "Businesses face more than 50 different taxes and regulatory costs. The cumulative burden, including the IMTT, drives the effective tax rate above 40%. This is discouraging compliance and undermining investor confidence."
The ART called for the complete scrapping of the IMTT and a rise in the tax-free income threshold to improve consumer spending power and ease pressures on business.
Economist Trust Chikohora echoed these sentiments, warning that over-taxation was strangling productivity. "There are too many taxes in Zimbabwe. The IMTT is imposed on top of income tax, VAT, PAYE and other levies - it's effectively a penalty for conducting formal business," he said. "At the very least, government should make it tax-deductible and raise the tax-free threshold to around US$200."
Chikohora also warned that duplicative regulatory fees and licensing burdens were forcing small and medium enterprises into informality, further shrinking the tax base.
Despite the calls, some analysts argue that Prof Ncube may have limited fiscal space to deliver sweeping reforms. "The Mid-Term Budget Review is more likely to signal policy intent rather than introduce structural changes," said economist Dr Prosper Chitambara. "The government still depends on taxes like the IMTT to fund operations, and any tax relief may only come in the full 2026 Budget."
Nonetheless, many economists insist that sustainable recovery lies in expanding the tax base, especially through the formalisation of the informal sector, rather than burdening compliant businesses.
Economist Malone Gwadu said cutting business costs was essential to incentivise formalisation. "There must be targeted support for productive sectors. Treasury should consider fee holidays for miners, support for manufacturers, and incentives for agriculture - especially after this year's improved harvest," he said.
These calls come as Zimbabwe implements the Zimbabwe Gold (ZiG) currency introduced earlier this year. The IMF recently endorsed the ZiG as a potential anchor of stability, conditional on strict fiscal discipline, adequate reserves, and institutional reforms. Despite this, the US dollar remains the preferred currency for transactions and government tenders.
Business leaders have also urged the Treasury to revise foreign currency surrender requirements, which currently mandate exporters to liquidate 30% of their proceeds into ZiG at the official exchange rate. The ART said the measure erodes export profits and reduces investment appeal. "Surrender thresholds must be reduced, and ZiG disbursements must be timely," it noted.
Illicit trade is also hurting exporters. Smuggling through porous borders is estimated to cost Zimbabwe between US$500 million and US$1 billion annually, with counterfeit goods displacing local products and undermining job creation.
Concerns are rising in the mining sector, which contributes 83% of export earnings and 73% of foreign direct investment, over possible new taxes under discussion. Industry players warn that uncertainty could deter future investment. "Mining taxation must be predictable and consistent," said a senior executive from the Chamber of Mines. "Zimbabwe's growing tilt toward resource nationalism, if not carefully managed, could scare off long-term capital."
ZimTrade board member Josephine Takundwa added that reducing production costs should be a priority. "Labour costs account for over 35% of production costs, largely due to dollarisation. While tax abolition may be unrealistic in the short term, a phased withdrawal of the IMTT would be a positive start," she said.
Takundwa called for improved logistics, trade facilitation, and support for value chains to drive competitiveness.
As Zimbabwe grapples with business closures, shrinking incomes and weakening public trust, all eyes are on Professor Ncube's Mid-Term Budget Review. Business leaders and economists alike are hoping it will deliver more than rhetoric - and outline a clear path to economic recovery and reform.
Source - Business Times
