ZIMBABWE National Chamber of Commerce (ZNCC) chief executive officer Chris Mugaga has criticised the proposed increase in value-added tax (VAT) in the 2026 National Budget, warning it will worsen an already “unacceptably high” tax environment.
Treasury has proposed increasing VAT to 15,5% from 15% to compensate for a 0,5 percentage-point reduction in the intermediated money transfer tax (IMTT) on local currency transactions. Government aims to raise US$9,4 billion in revenue next year, up from the expected US$7,93 billion for 2025.
But Mugaga said the VAT hike would hit the formal sector hardest. Although all consumers eventually pay VAT, only registered businesses — which make up 23,9% of enterprises — are required to collect, account for and remit the tax.
“The tax position remains unacceptably high. There was no need to tamper with the VAT rate — worse still given the poverty levels in the land,” Mugaga told NewsDay Business. “Zimbabwe’s tax environment already has a plethora of tax heads and regulatory charges, so arguing that our VAT is low compared to the region is misleading.”
He noted that while countries such as Mozambique and Zambia charge 16% VAT, they do not impose taxes like IMTT, nor do they have as many regulatory fees, tolling charges or operating licence requirements. The export surrender requirement also acts as an indirect tax, he said.
Apart from VAT, the government rejected business calls to scrap the 2% IMTT, opting instead for a partial overhaul that lowers the ZiG levy to 1,5% per transaction, from 2%, but keeps it at 2% for US dollar-denominated transactions.
“Treasury should have left VAT at 15%, gradually reduced IMTT to 1% for both ZiG and USD, and ensured it is tax-deductible as proposed,” Mugaga said.
He added that although parts of the budget reflect attempts to address business concerns, the VAT hike remains “unacceptable” and risks creating “a budget fiasco”, especially in the absence of a clear expenditure-cutting road map.
- Power crisis hits Proplastics factory
- ‘No easy road to recovery for Zim’
- Women urged to take advantage of Women’s Bank
- Half of Zim youths loafing: ZimStat
Keep Reading
Total expenditure for 2026 is projected at ZiG290,9 billion (US$9,5 billion).
Mugaga also flagged public procurement as a major source of fiscal leakage, saying poor due diligence results in lost value for government.
“The tragedy is with the absence of value for money — government loses through poor due diligence on public procurement,” he said.
‘About 30% of gross domestic product is public procurement — you can imagine the impact.”
