Online Reporter
Business Reporters
A RECENT proposal by the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, to reduce intermediated money transfer tax (IMTT) by 0,5 percent and simultaneously increase value-added tax (VAT) by 0,5 percent has ignited a sharp debate among Zimbabwe’s economic and business communities.
The move, intended to modernise the fiscal architecture, has drawn contrasting views on its potential impact on citizens, businesses and the nation’s long-term economic trajectory.
Economist Mr George Nhepera argues against any attempt to retain IMTT, proposing its complete removal to demonstrate a truly “pro-poor and pro-business” budget.
He said tax reduction, especially when linked to business activity, can paradoxically increase tax revenues and “ignite investment, in line with the open for business economic agenda”.
He believes a low-tax, low-interest rate environment is essential to achieving the national vision of an upper middle-income society by 2030.
“That vision can only be achieved in an environment of low taxes, low interest rates and low and stable inflation, including low budget deficit,” said Mr Nhepera.
He further stressed the need for the upcoming National Budget to align with the priorities of the National Development Strategy 2 (NDS2), cautioning against “mission drift”.
In contrast, economist Mr Stevenson Dlamini views the minister’s proposal not as a simple tax hike, but a “strategic pivot”, designed to modernise the fiscal system by “transitioning from taxing the movement of money to taxing the consumption of goods”.
Mr Dlamini highlighted the structural benefits of the dedollarisation agenda, noting that reducing IMTT lowers the “friction cost on digital transactions”, which currently “inadvertently penalises the use of ZiG (ZimGold) within the banking system”.
He posits a hypothetical household equation where the relief from IMTT reduction is theoretically offset by the VAT adjustment, resulting in a “revenue-neutral change for the consumer” on paper.
Mr Dlamini said the policy’s success “relies heavily on market efficiency”.
He places the responsibility on the private sector.
“The reduction in IMTT lowers production costs,” he said. “In a well-functioning market, these savings should be passed down the supply chain, neutralising the impact of the VAT adjustment.”
A distinctly cautious view is put forth by businessman Mr Luios Herbst, the former Zimbabwe National Chamber of Commerce (ZNCC) vice president for the Matabeleland chapter.
He argues that, while IMTT is “controversial”, it is also a key factor behind Zimbabwe’s recent “measurable progress towards fiscal consolidation and macro-stability”.
He stresses that IMTT is “predictable”, “broad-based, difficult to evade, simple to administer”, and crucially, “captures value from the informal economy in ways VAT simply cannot”.
Disrupting this equilibrium, he warns, introduces “avoidable uncertainty”.
Mr Herbst’s primary concern is the nature of VAT, which “compounds at multiple stages” for businesses, ultimately leading to “higher consumer prices, reduced spending power and pressure on sales volumes”.
Furthermore, he argues that increasing VAT “disproportionately affects the formal sector”, risking a wider gap with the informal market and undermining formalisation efforts.
For Mr Herbst, the priority is to “avoid shocks, maintain predictability and protect the fragile, but meaningful gains achieved thus far”.
He said there is “little wisdom in crafting a new wheel, hoping it will spin truer than the last”.
Ms Gladys Shumbambiri-Mutsopotsi agrees that IMTT is “widely viewed as distortionary”, but warns that replacing it with a higher VAT rate presents its own significant challenges.
She said VAT “is inherently regressive and directly impacts consumer prices”, which “could further erode household purchasing power at a time when inflationary pressures remain elevated”.
Ms Shumbambiri-Mutsopotsi believes a simple tax shift “risks suppressing aggregate demand” and is “unlikely to yield the desired developmental outcomes”.
She advocates for a more strategic and sustainable pathway, which includes broadening the tax base, phased restructuring of IMTT, enhanced expenditure efficiency and growth-driven revenue enhancement.
While the minister’s proposal is recognised as a reform of the tax system, the debate highlights clear tension: the desire to reduce the cost of digital transactions versus the risk of destabilising hard-won macroeconomic gains and increasing the cost of living through a consumption tax hike.
The prevailing consensus is that any tax reform must be approached strategically to ensure it is balanced, pro-growth and genuinely beneficial to the final consumer.
