Mthuli Ncube's VAT Hike Rationale Fails Under Scrutiny

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The Hidden Costs of Taxation in Zimbabwe

Finance Minister Mthuli Ncube’s refusal to reconsider the Value Added Tax (VAT) increase and the 2% US-dollar IMTT reveals a deeper issue within the government. It highlights a growing tendency to tax the poor while pretending that these measures are merely aligning with “regional standards.” This approach is not just ineffective—it is deeply disconnected from the realities faced by ordinary Zimbabweans.

In Parliament, Ncube dismissed concerns raised by MPs about the impact of these taxes on the population. Instead of addressing the challenges of falling incomes, collapsing formal employment, and widespread poverty, he compared Zimbabwe’s tax system to those of Zambia, Mozambique, and Tanzania. These countries have stronger economies, higher wages, and more functional public services. Such comparisons are misleading and fail to consider the critical factor of income levels.

A 15.5% VAT in a country where many earn as little as $100 a month is not the same as the same rate in a country where people earn $1,000 or more. For Zimbabwean households, which already spend a large portion of their income on essentials like food, rent, transport, and electricity, even a small increase can push basic goods further out of reach. This is not a minor adjustment—it is a significant burden for families already living on the edge.

The minister argues that the VAT increase is “small” and that it aligns with regional rates. However, this reasoning ignores the reality of inflation and the collapsing value of the local currency. When salaries remain frozen and pensioners struggle to afford medication, a half-percentage-point rise feels anything but insignificant. For many Zimbabweans, the difference between survival and hunger is measured in cents, not dollars.

Ncube also claims that 14 “core commodities” for low-income groups are zero-rated. While this sounds reasonable, it fails to address the broader picture of rising costs. Zero-rating a narrow list of items does not protect families from increasing expenses in areas such as transport, medical bills, and school supplies. Worse still, retailers often ignore zero-rating policies and raise prices anyway. This creates a false sense of security for policymakers, but it rarely reflects the lived experience of the poor.

On the IMTT, the situation is even more concerning. Ncube insists that lowering the 2% tax on US-dollar electronic transfers would remove the advantage of using the ZiG. This rationale suggests that the government’s strategy is not to build confidence in the local currency but to penalize citizens for choosing the more stable US dollar. This is economic coercion, not sound policy. By forcing people into the ZiG, the government is ignoring the preferences of businesses, consumers, and employers who rely on the US dollar to protect their income.

The IMTT has broader implications beyond currency politics. It is pushing Zimbabweans away from formal banking systems. Every percentage point of IMTT acts as a deterrent to electronic payments, leading people to revert to cash transactions. This not only undermines financial inclusion but also reduces formal economic activity, which is essential for sustainable revenue collection. With an already large informal sector contributing little in taxes, the IMTT is making the problem worse.

Parliament has valid concerns about the long-term effects of this tax. A policy that drives people out of the banking system eventually becomes self-defeating, as it leads to lower tax collection. Yet the Minister remains steadfast in his position, refusing to lower the IMTT on US-dollar transfers.

Zimbabwe’s tax regime should not be used as a tool to wage a currency war against its citizens. The bigger issue is the government’s reliance on taxing consumption rather than addressing the underlying economic issues. Zimbabweans are now paying more in indirect taxes than ever before, including VAT, fuel levies, passport fees, tollgates, and countless other charges. Instead of focusing on job creation, industrial revival, and export growth, Treasury has taken the easy route: squeezing more from a shrinking pool of taxpayers.

Regional comparisons are convenient, but they fall apart under scrutiny. While Zambia may have a 16% VAT, Zambians enjoy higher incomes, cheaper transport, and a more stable economy. Comparing Zimbabwe to these countries on VAT alone is like comparing a man running on two legs to one running on one. Context matters, and the government must be held accountable for ignoring the economic realities that shape taxation.

Zimbabweans are not refusing to pay taxes—they are demanding fairness. A tax system must be based on the principle of ability to pay, designed to raise revenue without destroying the very economic activity it depends on. It must not punish formalization, drive people into cash transactions, or place the heaviest burden on the poorest households.

This standoff between Parliament and the Minister is not just about VAT or IMTT—it is about the growing disconnect between those who make policy and those who live with its consequences. It is about a government that has become too comfortable taxing its way out of failure instead of reforming its way into progress.

No country has ever taxed itself into prosperity. And certainly not by imposing levies that choke the poor and suffocate the formal economy. Zimbabwe does not need higher consumption taxes—it needs leadership bold enough to prioritize production, investment, stability, and public confidence. Until then, VAT hikes and punitive transaction taxes will continue to deepen suffering and reveal how far removed the government has become from the everyday struggles of its people.