Despite public complaints over recent tax increases, Zimbabwe’s overall tax burden remains among the lowest in the region, placing greater strain on businesses that already comply, saidSouth Africa–based financial analyst Tinashe Mukogo.
Mukogo challenged claims by government critics that Zimbabweans are overtaxed, noting that the country collects very little in taxes relative to the size of its economy.
“While new levies, such as the increase in value-added tax (VAT) to 15.5 percent and the digital services tax introduced this month, may have sparked perceptions of overtaxation, Zimbabwe collects only 7.2 percent of its GDP in tax revenue,” he said.
By comparison, Namibia collects 7.9 percent, Zambia 16.8 percent, Kenya 14.1 percent, and South Africa 28.4 percent, placing Zimbabwe at the bottom in the region.
“The African Development Bank targets a long-term tax-to-GDP ratio of 27.2 percent for African economies,” Mukogo added.
“Zimbabwe would need to quadruple its tax collection to meet that benchmark. By these measures, the country is actually undertaxed.”
Mukogo identified the large informal economy, estimated at 64.1 percent of total economic activity, as the main barrier to higher tax revenue.
“The informal sector pays little tax and is extremely difficult to monitor,” he said.
“Until more businesses are formalised, the burden falls disproportionately on those who already comply.”
To increase compliance, Mukogo recommended that Government simplify tax administration and link taxation to tangible benefits, strategies that have worked in countries such as Mexico, Kenya, and Brazil.
Mexico’s Fiscal Incorporation Regime provides free accounting tools, while Kenya’s iTax system integrates mobile money for easier filing, while Brazil’s SIMPLES programme combines tax payments with social security contributions, effectively turning part of the tax into a pension benefit.
“Broadening the tax base to include more informal sector participants would ease the load on compliant taxpayers and improve government revenue without raising rates,” Mukogo said.
He concluded that addressing the informal economy is critical for Zimbabwe’s fiscal sustainability because without urgent reforms to formalise businesses and expand the tax base, the financial burden is likely to increase, on law-abiding taxpayers, potentially stifling investment and slowing economic growth.
