Zimra's revenue surge masks growing pressure on formal businesses

Zimbabwe's tax authority has been credited with a strong revenue collection performance after recording a sharp increase in tax receipts, but a new industry analysis warns that the figures may conceal growing structural weaknesses and mounting pressure on compliant businesses.

The Zimbabwe Revenue Authority (Zimra) collected US$4.34 billion in net revenue during the first five months of 2026, representing a 47% increase from the US$2.95 billion collected during the same period last year.

Over the past five years, the revenue authority's collections have grown by almost 68%, rising from US$4.56 billion in 2021 to US$7.65 billion in 2025.

The improved collections have placed Zimbabwe on track for tax revenue to account for 16% of gross domestic product (GDP) this year, with Government targeting an increase to 22% by 2030.

However, a new industry analysis argues that the headline figures should not automatically be interpreted as evidence of improved tax compliance or more effective investigations.

Instead, it says Zimbabwe's fiscal position remains heavily dependent on a small number of taxpayers and taxes.

"Beneath the growth story lies a fiscal structure that is heavily dependent on a narrow base. Indirect taxes account for 58.63% of total revenue, with VAT alone contributing nearly 24%.

"Just five formal sectors — financial services, information and communications technology, manufacturing, mining, and wholesale and retail trade — carried 83.35% of the entire national tax outturn in 2025," the analysis states.

According to the report, manufacturing alone contributes almost one-fifth of all tax collections, exposing Government revenue to any disruption affecting formal production or retail supply chains.

The analysis comes amid growing concern from business organisations over Zimra's increasingly aggressive tax enforcement.

Last week, the Zimbabwe National Chamber of Commerce raised concerns over the authority's compliance approach, while the Confederation of Zimbabwe Industries voiced similar concerns the previous week, warning that the enforcement strategy risks making participation in the formal economy less attractive.

The report attributes much of the recent increase in revenue to extensive audits and reassessments.

"Zimra's Audits and Investigations division recovered ZiG4.63 billion and US$540.73 million over the fiscal year. Sector-based investigations yielded the larger share, while routine audits finalised over 7,000 cases," it said.

It noted that outstanding tax debt has risen by 35.53% to ZiG31.15 billion, which Zimra itself attributes to intensified compliance checks and higher corporate tax assessments.

However, the analysis cautions against treating assessments as equivalent to actual tax recovery.

"A reassessment raised is not the same thing as a tax gap lawfully closed, and a book entry on a taxpayer account is not necessarily evidence of cash collected, tax finally due, or misconduct proved," it said.

The report questions how much of Zimra's reported success stems from uncovering previously undeclared tax liabilities and how much reflects the reopening of historical tax positions where businesses had already submitted returns and settled their obligations under the rules applicable at the time.

"If the apparent collection gain is built substantially on additional assessments which recharacterise historic local-currency compliance as foreign-currency underpayment, then the success story is less about investigative excellence than about the coercive power of reassessment," the report states.

"It is the difference between finding hidden income and converting a previously accepted compliance position into a new demand after the event."

The analysis argues that Zimbabwe's multi-currency environment has exposed legal uncertainty within the administration of Value Added Tax (VAT).

It contends that while Zimra has increasingly assessed VAT separately in local and foreign currency, the VAT Act does not clearly establish such a dual-currency computation framework.

"The objection is not that Zimra may never investigate VAT compliance. It is that investigation cannot be used to supply a computation rule which Parliament did not clearly enact," the report says.

It further argues that administrative notices cannot substitute for legislation enacted by Parliament.

The analysis also cites Supreme Court judgments, including Inamo Investments, Zimplats and Delta Corporation, arguing that they have been interpreted too broadly to justify current reassessment practices.

It points to the enactment of Section 37AA through Finance Act No. 8 of 2022 as evidence that Parliament itself recognised the need to formally legislate a computation method for multi-currency VAT rather than relying on administrative practice.

"The fact that Parliament found it necessary to legislate at all is itself evidence that the earlier framework lacked adequate statutory footing," the report says.

It concludes that unless legislation clearly authorised the revised method of calculating VAT while preserving recognition of taxes already paid in local currency, reassessments risk becoming a mechanism for reopening previously settled tax obligations rather than correcting genuine non-compliance.