VAT HIKED

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). Newsday

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