Save industry and commerce
The escalating legal battle between banks and the Zimbabwe Revenue Authority (ZIMRA) over the disallowance of interest expenses has exposed a deeper fault line in the country’s fiscal architecture.
In the pursuit of revenue, authorities risk weakening the very institutions that generate taxable economic activity.
Banking, by its nature, is an intermediation business. Government should consider saving industry and commerce.
Interest paid on deposits and borrowed funds is not a discretionary expense, it is the raw material of the sector.
To disallow such costs in the computation of taxable income is to tax banks on phantom profits.
It distorts financial statements, inflates tax liabilities and ultimately undermines the sector’s ability to perform its primary function: lending to the economy.
The consequences are already evident. Reduced profitability constrains capital buffers. Weakened balance sheets limit lending appetite.
And when banks pull back, the ripple effects cascade across industry and commerce, businesses struggle to access affordable credit, expansion plans stall, and economic momentum slows.
Institutions have flagged significant retrospective tax exposures, with some forced to reconsider critical funding lines. When a major lender signals it was on the brink of suspending tens of millions of dollars in foreign credit lines, the message is clear, policy uncertainty is choking liquidity at its source.
Government’s partial policy reversal, allowing interest expenses to be deductible going forward, is a welcome acknowledgment of the flaw.
Finance Minister Mthuli Ncube’s admission that the previous framework overstated taxable income is both candid and necessary. But it does not go far enough.
The real burden lies in the retrospective application of the rule between 2019 and 2025, a period during which banks now face punitive and, in many cases, destabilising tax claims.
This backward-looking approach erodes trust in the policy environment. Investors and financiers, both local and international, rely on predictability. When rules are reinterpreted and applied retrospectively, confidence dissipates.
Government must therefore go beyond prospective correction and confront the legacy issue decisively.
A negotiated settlement, as currently being explored, is the most pragmatic path. This could involve structured relief measures, waivers, or recalibrated assessments that reflect the economic realities of banking operations.
At stake is more than the profitability of financial institutions. It is the stability of the broader economic ecosystem. Banks are the arteries of commerce; when they constrict, the entire system suffers.
Equally concerning is the broader signal being sent by an increasingly aggressive tax administration regime.
While revenue mobilisation is critical, it must not become extractive to the point of self-defeat. Compliance frameworks should be predictable, transparent and aligned with economic growth objectives. The call by business groups for risk-based, non-intrusive audits is both reasonable and urgent.
Zimbabwe stands at a delicate juncture. Authorities are seeking to attract investment, deepen financial markets and stimulate growth. These ambitions cannot coexist with policies that inadvertently penalise capital formation and financial intermediation.
Saving industry and commerce is not about granting concessions, it is about recognising the symbiotic relationship between the State and the private sector. Sustainable tax revenues are a function of a thriving economy, not the other way around.
