Cornered Mthuli rejects calls to scrap tax

“We are under pressure to reduce IMTT or scrap it, but this is one of the taxes that have kept us going as a country and as a government,” Professor Ncube said. “We need these resources to run programmes — be it infrastructure, payment for vaccines, and all that. That’s where the resources are coming from.”

He warned that any reduction or scrapping would have to be offset elsewhere.

“You can allow us to remove IMTT by 0.5%, but are you able to allow us to increase VAT by that percentage? Would you agree with that? Because we need that revenue — we can’t function without it.”

The dilemma underscores Zimbabwe’s narrow fiscal space, with the IMTT contributing significantly to total revenue.

“Yes, it’s a significant proportion. Wiping it off has many implications, including increasing the budget deficit, which could stoke inflation,” said Zimbabwe Economics Society vice-president Misheck Ugaro.
“The other option would be cutting expenditure, but that’s not feasible — line ministries are already underfunded.”

Ugaro urged restructuring the tax rather than scrapping it outright.

“It’s a progressive tax that touches everyone, but perhaps the minister can exempt vulnerable groups or basic transactions. Raising VAT instead would be a worse solution,” he said.

The IMTT applies to nearly all electronic transfers — bank-to-bank, mobile money, online banking, ZIPIT, and outbound foreign payments — at a flat 2 percent rate.

Designed to promote transparency and formalisation, it has instead driven businesses and individuals back to cash, undermining the Reserve Bank of Zimbabwe’s (RBZ) digitalisation drive.

Its unpopularity surfaced prominently at the ruling ZANU-PF People’s Conference in Mutare last month, where delegates demanded its total removal.

Industry groups describe the tax as “an albatross around the formal economy’s neck.”

In its 2026 Budget Submission, the Zimbabwe National Chamber of Commerce (ZNCC) warned that the levy “increases costs, distorts supply chains, and encourages cash usage,” undercutting the government’s push for a cashless economy.

“We recommend that Treasury make IMTT deductible for corporate income tax in the interim and gradually reduce the rate to 1% on USD and 0% on ZiG transactions, with a clear roadmap toward total elimination by 2027,” ZNCC said.

The CEO Africa Roundtable (ART) echoed the call, warning the tax “distorts capital costs” and hurts formal business operations.

“We are calling for the abolition or reduction of the IMTT, especially for business-to-business and export transactions,” ART said.

Banks, often accused of high service charges, have also blamed the IMTT for escalating costs and discouraging banking.

“We are recommending Treasury to significantly reduce or remove taxes on digital and cash transactions. If removed, this will incentivise formal banking, expand the taxable base, and reduce cash-based informality,” said the Bankers Association of Zimbabwe (BAZ).

Official data show that the volume of electronic transactions has plummeted 29% between 2017 and 2024 — from 988m to 703m — as more people revert to cash.
Point-of-sale transactions have fallen 56%, from 214m to 94m, while mobile and ZIPIT transfers dropped 24%, from 754m to 572m.

Analysts say this retreat from digital payments has shrunk banks’ deposits and reversed financial-inclusion gains, pushing more activity into informal channels.

The controversy has also reached Parliament, where the Industry and Commerce Portfolio Committee, chaired by Clemence Chiduwa, said the levy has “deviated from its intended purpose.”

“The informal sector largely transacts in cash and remains outside the tax net, thereby placing a disproportionate burden on formal, compliant businesses,” Chiduwa said.

The committee urged Treasury to cut the IMTT rate to 1%, make it deductible for income-tax purposes, and restore fairness and competitiveness to the system.

“Economic agents now prefer cash, and with disintermediation, it becomes even more difficult to tax citizens,” he warned.

The IMTT has become one of the most divisive tools in Professor Ncube’s reform arsenal ,a tax that sustains the state yet suppresses growth.

Removing it risks a fiscal vacuum; retaining it risks choking the formal economy.

For the minister, the choice is stark.

He can appease the public and risk fiscal instability, or defend the tax and deepen public resentment heading into 2026, a politically sensitive gamble.

As Ugaro notes, “something has to give. The Minister must find a middle ground that sustains revenue without suffocating growth.”