Tax shock budget triggers backlash

LIVINGSTONE MARUFU

The 2026 national budget has ignited a wave of criticism, with economists and business leaders, warning that Finance Minister Professor Mthuli Ncube’s proposals risk destabilising the economy, entrenching informality, and imposing a punishing burden on households and firms.

Rather than promoting investment or easing fiscal pressures, the budget raises VAT to 15.5%, hikes gold royalties to 10%, among the highest in the world and introduces a new withholding tax targeting e-commerce businesses.

Analysts have described the package as a blueprint for revenue extraction rather than economic development, cautioning that it could intensify inflation, trigger company closures, and deepen poverty.

Professor Ncube’s minor adjustment to the Zimbabwe Gold (ZiG) intermediated money transfer tax (IMTT), reduced from 2% to 1.5% while keeping the US dollar levy at 2%, has been largely dismissed as symbolic, given the offsetting VAT increase. Economists argue that the combination of higher indirect taxes and punitive levies on strategic sectors will worsen the operating environment, stifle formalisation, and leave households and businesses struggling to survive.

Economist Professor Gift Mugano said: “This budget is about revenue collection and there is nothing in this budget that is pushing for investment promotion and economic development which is part of the mandate of the Ministry. Specifically, cash withdrawals levy—an effective instrument of anti-banking—increasing gold royalties to 10% (the highest in the world) on sales is punitive and will cause smuggling of gold, and increasing VAT to 15.5% will fuel inflation and make lives of people miserable.”

He added: “The budget continues to show a sustained trend of over utilisation of funds by some ministries… However, critical ministries such as Industry and Commerce, and Foreign Affairs and International Trade received a mere 23% of their vote by September 30… This makes the budget and budgeting process ceremonial.” Mugano also noted that the budget is silent on workers’ welfare, and that the new digital services tax is counterproductive.

Echoing the critique, another economist Vince Musewe said Treasury appears more focused on revenue extraction than economic growth. “It appears the budget is all about collecting more taxes,” Musewe said. “An economy which relies on VAT as the largest part of taxes indicates a fundamental error. When the wholesale and retail sectors outperform productive sectors it reflects a fundamental error… When you charge people more for withdrawing their hard-earned cash it reflects inferior logic. We need new thinkers.”

Business leaders also voiced alarm. Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Christopher Mugaga warned that Zimbabwe’s tax regime is already suffocating businesses, and the VAT increase is “unacceptable.” “The tax position remains unacceptably high. There was no need to tamper with the VAT rate, worse still given the prevailing poverty levels in the land,” Mugaga said. He cautioned that regional VAT comparisons are misleading because neighbouring countries do not levy Zimbabwe’s numerous additional taxes and regulatory charges.

Mugaga also highlighted the absence of a credible roadmap for expenditure reduction and warned that public procurement leakages continue to drain national resources.

“The public procurement area also needs attention… Government loses through poor due diligence on public procurement,” he said.

Youth Empowerment, Development and Vocational Training Minister, Tino Machakaire, says the budget allocated to his ministry is not enough to meet all its programme targets.

“Obviously its not enough,” Machakaire told ZiFM Stereo News on the side-lines of the launch of the Ruwa Social Innovation Hub.

He say, however, that it is important to engage in Public Private Partnerships as the country cannot rely on fiscus alone.

“Our previous budget was inadequate because we received almost 38% of what we had requested. Same applies with this one, we have been allocated less that 40% of what we requested but I hope through some collective approach we are going to engage with private partners so that we achieve what we want as a ministry. We cannot rely on fiscus alone,” he added.

Finance Minister Professor Mthuli Ncube allocated ZiG 1.7 bn to the Ministry of Youth in the 2026 National Budget, earmarked for empowerment programmes and related projects.

Parliamentary Portfolio Committee on Primary and Secondary Education chairman Hon Supa Mandiwanzira says more investment must be channeled towards Early Childhood Development as it provides the base for a skilled and focused citizen. He was speaking at the post-2026 National Education Budget Analysis organised by stakeholders in the sector which include Education Coalition of Zimbabwe (ECOZI), SayWhat, Teach for Zimbabwe, and ZINECDA.