Tawanda Musarurwa

IN an economy navigating sanctions, inflationary pressures and a growing informal sector, the Zimbabwe Revenue Authority (Zimra)’s full-year 2024 tax performance paints a revealing picture of a nation grappling with a dual economy.

With a combined gross revenue collection of ZiG108,66 billion for the year – against a target of ZiG100 billion, exceeding it by 8,3 percent – Zimra continues to impress on headline figures.

But, a deeper look at the data from both halves of the year reveals structural imbalances, an overstretched formal sector and an elusive informal economy.

A growing pie, but…
Zimra’s positive 2024 revenue performance was driven largely by improved compliance due to several initiatives by the taxman.

Last year, Zimra launched Release 2 of the Tax and Revenue Management System (TaRMS), upgraded its Automated System for Customs Data (ASYCUDA) system and continued with its fiscalisation projects.

“In the second half of 2024, the Authority successfully exceeded both its quarterly and annual revenue targets, a direct result of the improvements brought about by digitalisation,” said Zimra board chairperson Mr Antony Mandiwanza in the H2 report.

The improved performance was also attributable to inflation-indexed collections.

The ZiG, which had been introduced in April at an official exchange rate of 13,56 to the United States dollar was devalued by the Reserve Bank of Zimbabwe in September, by 43 percent.

Domestic taxes accounted for the bulk of revenue, contributing ZiG74,34 billion, while customs and excise duties brought in ZiG31,2 billion.

This mix highlights a concentrated tax base.

Just three tax heads – value added tax (VAT) on local sales, Pay-As-You-Earn (PAYE) and corporate income tax – contributed more than half of the total revenue.

PAYE collections stood at ZiG22,68 billion across the year, while VAT on local sales totalled ZiG21,66 billion.

Corporate tax followed with ZiG9,75 billion.

This reveals a tax regime leaning heavily on salaried workers and consumer spending, while the corporate and informal sectors remain relatively under-contributing.

The elephant outside the room
According to the FinScope Micro, Small and Medium Enterprises Survey Zimbabwe (2022), the country had 1 639 807 MSME business owners, employing 1 704 454 people and generating a combined annual turnover of US$14,2 billion.

Despite contributing more than 60 percent to the country’s gross domestic product (GDP) and employing over 80 percent of the workforce, the informal sector continues to evade the taxman.

The Finscope study also highlighted that 94 percent of MSMEs were not formally registered, and therefore out of the corporate tax system.

Presumptive taxes (which typically fall under “other taxes”) – a mechanism meant to capture informal traders and service providers – contributed just ZiG1,5 billion, around 1,3 percent of total collections last year.

With formal incomes significantly taxed, the absence of meaningful informal sector contributions is stark.

A presumptive tax is typically levied on unregistered enterprises, which leaves various gaps in terms of enforcement.

Zimbabwe has previously made efforts to ensure that its tax system is horizontally equitable.

The fiscal authorities initially introduced presumptive tax in 2005, which was modified in 2011, to broaden the revenue base in view of the increasing informal business activities.

In the 2024 National Budget, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube tried to cover most of the small enterprises under presumptive tax.

But, after the tax failed to gain traction during the first few months of 2024, Treasury proposed some changes through the 2024 Mid-term Budget and Economic Review, which included a downward review to enhance compliance.

For example, the presumptive tax for informal traders was reduced from the initially set figure (of ZWL3 250) plus 10 percent monthly rental to just 10 percent monthly rental.

The taxes could also be wholly paid in the local currency.

But, without digital enforcement tools or transactional data, polite encouragement will not be enough to enforce tax compliance in the informal sector.

Additional measures were added in the 2025 National Budget.

Taxing the few
The year’s data lays bare the inequities within Zimbabwe’s tax system.

PAYE collections rose from ZiG7,56 billion in the first half of the year (H1) to ZiG15,12 billion in the second half (H2) – an increase reflecting not so much improved wages, but bracket creep as inflation pushed nominal salaries into higher tax bands.

Corporate tax contributions rose – from ZiG3,22 billion in H1 to ZiG6,53 billion in H2.

Meanwhile, excise duty collections, primarily on fuel, alcohol and tobacco, hit ZiG12,64 billion – with ZiG5,19 billion collected in H1 and a rise to ZiG7,45 billion in H2.

These consumption taxes, while easier to collect, are inherently regressive and fall hardest on low- and middle-income earners.

This imbalance raises questions about the fairness and sustainability of Zimbabwe’s tax structure, where formal sector employees are squeezed harder, while large swathes of the economy remain untaxed.

Strong performance, but systemic gaps remain
Zimra deserves credit for surpassing its revenue targets in both halves of the year.
Its reported success stems from “risk-based audits, intensified debt follow-ups and data matching initiatives.”

Yet much of this outperformance was driven by inflation and currency depreciation, which inflated nominal tax liabilities.

The Intermediated Money Transfer Tax (IMTT), a levy on electronic transactions, generated ZiG6,9 billion in 2024 – ZiG1,25 billion in H1 and ZiG5,65 billion in H2 – reflecting high transaction volumes in a largely cash-lite economy.

But this too highlights a growing dependence on indirect taxation, which is easier to enforce, but less equitable.

Refunds remain a soft spot, with delays in processing due to “verification challenges” potentially undermining business liquidity.

Zimra processed ZiG3,34 billion in VAT refunds for the year – ZiG1,37 billion in H1 and ZiG1,97 billion in H2.

The shrinking real tax base
Beneath the impressive totals lies a troubling reality: Zimra’s gains seem largely nominal.

“The numbers suggest reforms within enforcement and compliance more than economic activity growth,” says economic analyst Christopher Chenga.

“The gains are nominal, because they do not calculate the real inflation and ZiG depreciation to US dollar.”

There is limited evidence of broadening the tax base through new taxpayers or formalising previously untaxed sectors.

Mining royalties, for instance, contributed only ZiG3,07 billion for the year – ZiG973 million in H1 and ZiG2,1 billion in H2.

This is alarmingly low for a sector that dominates export earnings.

But, this may be explained by the Government’s move to allow the payment of mining royalties in kind for some key minerals.

Statutory Instrument 189 of 2022, which requires miners to pay royalties partly in kind, partly in foreign currency and partly in local currency.

According to the SI, royalties for gold, diamonds, platinum, lithium and other minerals prescribed by the Reserve Bank of Zimbabwe (RBZ), 50 percent in kind, in a form and purity or quality prescribed by the central bank in a statutory instrument, 10 percent in foreign currency (in cash) and 40 percent in the local currency.

Likewise, agriculture – a key GDP contributor – remains poorly represented in the tax ledger, with little sectoral transparency or compliance data published. Without reform, Zimra risks taxing the same shrinking pool of contributors while more productive sectors remain shielded.

Policy implications
To improve tax compliance and broaden the revenue base, several policy actions are necessary.

First, the informal sector, which is too significant to overlook, must be brought into the tax net.

This requires Zimra to adopt digital tracking tools and implement simplified tax regimes tailored to MSMEs.

Second, equity in the tax system must be strengthened by offering relief to low-income earners, while increasing audits on high-revenue companies.

Transparency should be enhanced by publishing compliance rates and revenue data by sector, which would help identify collection gaps and curb tax evasion.

Zimra’s 2024 results show a tax system that works – but only for the part of the economy it can reach.

The formal sector continues to bear the brunt of revenue collection, while the informal and corporate segments operate in relative opacity.

And while Zimra’s efficiency is improving, more reforms are required.

Zimbabwe does not just need to collect more tax – it needs to collect better tax. And that means expanding the base and enforcing compliance across all sectors.

ORIGINALLY PUBLISHED IN THE HERALD – https://www.pressreader.com/zimbabwe/the-herald-zimbabwe/20250522/281861534418464