Finance minister Mthuli Ncube’s proposal to cut only the 2% intermediated monetary transfer tax (IMTT) to 1.5% will not provide any relief to the country’s struggling businesses and ordinary people, who are choking under excessive tariffs.
Ncube actually wants to give with one hand and take with the other as he raised value added tax (VAT) from 15% to 15.5% in the proposed 2026 budget.
He also proposed to keep the IMTT for US dollars at 2%. Most Zimbabweans now transact in US dollars as the ZiG, which was introduced last year, remains in short supply.
Ahead of the budget, Ncube had received representations from the Confederation of Zimbabwe Industries (CZI) to scrap the IMTT altogether because it is suffocating businesses..
For years, CZI has argued that the IMTT pushes production costs by as much as 10% as it applies to the whole value chain.
After last year’s budget, the industry body told Ncube that because the tax that was first introduced in 2018 “local products are thus priced relatively higher than regional products, thereby undermining country competitiveness.”
CZI argued that manufacturers were forced to push the tax to consumers. The body made a similar representation to the minister before he presented his budget last Thursday, which was seemingly ignored.
Ncube’s own party, Zanu PF, also resolved at its annual conference in October that it was high time that the tax on electronic transactions be scrapped because it was contributing to the high cost of living in Zimbabwe.
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Besides stubbornly holding on to the IMTT, the minister introduced other new taxes, including the 15% digital services withholding tax on global tech giants, including Google, YouTube, and satellite internet provider Starlink.
He also removed the qualifying threshold for the 5% electronic commerce operators’ tax, meaning all foreign e-commerce platforms serving Zimbabwe must now comply, regardless of revenue size.
Such measures would not only hurt the majority poor, but are also contrary to the government’s started goals to improve the ease of doing business.
Zimbabweans are among some of the most taxed people and at the same time the country has some of the highest poverty levels in the world.
There is clearly a big problem with the government’s overreliance on taxes to fund its operations.
Instead of piling taxes on already over taxed businesses and citizens, the government should be coming up with solid measures to plug revenue leakages.
The country loses billions of dollars through illicit financial flows driven by known politically exposed people, who flaunt their ill-gotten wealth every day, yet it is the poor citizens who have to shoulder the burden of financing government operations.
There is nothing more diabolical than that.
