THE GOVERNMENT has hightened taxpayers misery by hiking the value-added tax (VAT) rate to 15,5% as it hunts for an extra US$1,47 billion in revenue for 2026 in a move that will weigh heavily on the 23,9% of the economy that is compliant.
Finance, Economic Development and Investment Promotion minister Mthuli Ncube announced the increment while unveiling the 2026 National Budget that the government expects to collect revenue equivalent to US$9,4 billion next year, up from this year’s expected US$7,93 billion.
Ncube’s VAT increase came hard on the heels of the release of the Zimbabwe Tax Perception Survey 2025, conducted by Zimbabwe Taxpayers Platform that revealed that nearly nine out of 10 citizens find that the tax burden no longer matches their ability to pay.
The survey noted that citizens want fewer and lower taxes overall, arguing that high tax rates and a myriad of levies are stifling disposable incomes and business growth.
VAT is an indirect tax on consumption, charged on the supply of taxable goods and services.
It is levied on transactions rather than directly on income or profit and is also levied on the importation of goods and services.
So, while VAT is ultimately paid by all consumers, including the 76,1% informal sector, the formal sector bears the brunt of the burden because only registered businesses are required to collect, account for and remit the tax to government.
Ncube said the hike was meant to allow a partial reduction in the intermediated money transfer tax (IMTT).
“As a quid pro quo to the above concessions, and to partially compensate for the revenue forgone arising from the IMTT rate reduction and deductibility measures, I propose to increase the value-added tax rate by 0,5% from 15% to 15,5%, effective January 1, 2026,” he said.
“The measure will preserve fiscal balance while maintaining VAT within a regionally competitive range.”
He proposed reducing the IMTT rate on ZiG-denominated transactions from 2% to 1,5%, to promote use of local currency and lower transaction costs while keeping the rate at 2% for foreign currency transfers.
“Value-added tax remains the largest source of indirect tax revenue in the country,” Ncube said.
“However, its efficiency is hampered by compliance and administrative challenges, as well as multiple concessions, comprising zero-rated and exempt products.
“There is, thus, need to introduce measures intended to improve the efficiency of the tax, promote fairness and ensure that the system supports growth in economic activity.”
These measures include splitting of supplies for VAT purposes.
“Under the current VAT legislation, supplies made by registered operators may comprise both taxable and exempt components.
“In such instances, the law requires that the operator apportions input tax incurred on goods and services used to make both taxable and exempt supplies.
“The apportionment is based on a fair and reasonable method approved by Zimra [Zimbabwe Revenue Authority].
“However, Mr Speaker Sir, in practice, the apportionment and correct classification of mixed supplies have posed significant administrative and compliance challenges for both tax administration and taxpayers, respectively.”
He said the current legislative provisions, while requiring apportionment, did not expressly compel the combining of mixed supplies at the transaction level, for example, the provision of meals and other services that combine VAT standard-rated and exempt supplies.
“In order to enhance VAT compliance, accuracy and transparency, I propose that legislation be amended to standard-rate goods and services produced from a combination of mixed supplies, notwithstanding the current apportionment mechanism. This measure is effective from January 1, 2026,” Ncube said.
He also proposed that VAT on imported services be declared and remitted in the currency of trade and introduced penalties and interest for failure to account for taxes in the currency of trade, effective January 1, 2026.
Rentals are also expected to rise as Ncube announced the mandatory registration with Zimra of all commercial and non-commercial properties where business activities are conducted.
This measure includes compelling property owners or managers to submit quarterly tenant registers, occupancy lists and rental schedules to Zimra to facilitate audit and enforcement.
“I propose that a property owner or manager who fails to register and account for Rental Income Tax, as well as withholding 10% of rental income payable by informal sector operators, be subject to a penalty equivalent to the Rental Income Tax and the Presumptive Tax payable thereof, including interest,” Ncube said.
“Furthermore, I propose that Zimra be empowered to temporarily close the premises used for such businesses until completion of compliance processes. This measure takes effect from January 1, 2026.”
He said the 2026 Macroeconomic Fiscal Framework was premised on bold revenue mobilisation strategies, enhanced tax administrative efficiencies, complemented by a suite of robust measures aimed at improving tax compliance.
“These will also be accompanied by sustained fiscal discipline and expenditure alignment,” Ncube said.
“In this regard, government is targeting to collect revenues amounting to ZiG288 billion or 16,9% of GDP (approximately US$9,4 billion).
“The revenue is broken down as tax revenues of ZiG281,5 billion (approx US$9,2 billion) and non-tax revenues of ZiG6,1 billion (approx US$200 million).
“This is consistent with a projected real GDP growth rate of 5% in 2026 and nominal GDP of ZiG1,7 trillion.”
The projected revenue growth is also premised on improved yields from revenue-raising interventions outlined at the end of the budget statement.
“The revenue envelope, coupled with government’s borrowing capacity, provides for an overall expenditure amount of ZiG290,9 billion (US$9,5 billion), which translates to 17% of GDP (gross domestic product),” Ncube said.
“The total expenditure consists of recurrent expenditures of ZiG249,8 billion (US$8,2 billion) and capital expenditures of ZiG41 billion (US$1,3 billion).
“Beyond the near term, expenditures are expected to increase in line with resource mobilisation capacity.”
Dzivarasekwa MP Edwin Mushoriwa told NewsDay that the 2026 national budget presented by Ncube was yet another empty ritual — a document crafted to satisfy legal formalities, not to solve Zimbabwe’s problems.
“For eight straight years, the minister has produced budgets that look good on paper, but collapse at the point of disbursement. Nothing in this budget suggests that there will be change,” he said.
“Government claims the budget is anchored on NDS 2 (National Development Strategy 2), yet the minister refused to account for the failures of NDS 1.
“And the secretive, last-minute launch of NDS 2 only confirms one thing: the 2030 upper-middle-income dream is political theatre, not an economic plan.
“This budget punishes the poor through regressive taxes while starving essential services.
“Water, electricity, health and education — the foundations of national development — remain neglected and underfunded.”
He said in the end, the 2026 budget ducks every major national challenge.
“It ignores poverty, inequality, corruption and the chronic misallocation of public funds. Zimbabwe needed a bold, honest, pro-poor, pro-production budget,” Mushoriwa said.
“What we got, instead, is another glossy statement that will not deliver — and that pushes ordinary Zimbabweans deeper into hardship.” — NewsDay
