• Government is considering further IMTT reductions while exploring alternative sources of fiscal revenue
• Previous IMTT relief coincided with higher VAT, with IMF estimates suggesting a net revenue gain
• Transaction taxes and digital service charges raise broader questions about Zimbabwe's cost of doing business

Harare – Zimbabwe is considering further reductions to the Intermediated Money Transfer Tax (IMTT) as Government seeks to ease transaction costs while exploring alternative revenue streams to compensate for potential fiscal losses. The proposal was disclosed by Finance Minister Professor Mthuli Ncube during the ruling ZANU-PF party's annual conference in Chinhoyi, signalling a possible continuation of Treasury's efforts to review a tax that has become a significant cost for businesses and households operating through formal payment channels.

The proposed adjustment follows January 2026's reduction of IMTT on ZiG transactions from 2% to 1.5%, while foreign currency transactions remained subject to the 2% charge. Ncube indicated that additional reductions were under consideration, although Treasury has yet to specify the proposed rate, implementation date or replacement revenue measures.

However, the announcement comes against the backdrop of a fiscal adjustment that raises questions about the extent of relief taxpayers can expect. When Government reduced IMTT on ZiG transactions, it simultaneously increased Value Added Tax (VAT) from 15% to 15.5%, explicitly identifying the higher consumption tax as partial compensation for the revenue surrendered through transaction-tax reforms. The arrangement presents a familiar fiscal dilemma: reducing the cost of transferring money while recovering the difference through spending risks redistributing the tax burden rather than meaningfully lowering it.

An International Monetary Fund assessment quantified the previous trade-off, estimating that the IMTT reforms would reduce fiscal revenue by approximately US$68 million, against US$73.8 million expected from the VAT increase. The additional VAT collections were projected to exceed IMTT relief by US$5.8 million, although the estimates do not establish the eventual revenue outcome or how the burden is distributed among individual taxpayers.

The comparison matters because a reduction in one levy does not necessarily produce equivalent savings across the economy. Businesses may incur lower payment charges while households face higher prices for VAT-liable goods and services. Some taxpayers benefit more than others, depending on their spending patterns, frequency of electronic payments and ability to recover input VAT.

Introduced in October 2018, IMTT has become an important source of revenue for Treasury, primarily because it applies to qualifying electronic transfers rather than the profits generated from economic activity. That distinction creates costs across supply chains in which payments occur repeatedly before a product reaches the final consumer.

A manufacturer purchasing raw materials, a wholesaler paying suppliers and a retailer settling operating expenses may each incur transfer charges on separate qualifying payments. For businesses operating on narrow margins, these costs accumulate independently of profitability, reducing working capital available for inventory, wages and investment.

At 2%, a taxable US$1,000 transfer attracts a US$20 charge, compared with US$15 under the reduced 1.5% rate. The difference appears modest for an isolated payment, but its significance grows when businesses process substantial transaction volumes throughout the month.

Zimbabwe's dual-currency operating environment introduces another complication. Foreign currency payments remain subject to the higher rate, while qualifying ZiG transfers benefit from January's reduction. Businesses relying heavily on US-dollar settlements therefore experience limited direct relief from the adjustment.

By August 2026, ZiG reportedly accounted for 43% of transactions within the national payments system, underscoring the local currency's growing role in formal payments. However, this does not establish that lower IMTT caused the increase, as currency availability, regulatory requirements and commercial preferences also influence payment behaviour.

Reducing transaction taxes could encourage greater use of formal channels, particularly among smaller businesses seeking to minimise operating expenses. The potential benefits extend to payment transparency, financial inclusion and liquidity circulation, although their magnitude will depend on how far Treasury ultimately reduces the levy.

The VAT Trade-Off

The January adjustment provides a useful test of the relationship between tax reductions and actual economic relief. Unlike IMTT, which is charged on qualifying transfers, VAT is generally borne by final consumers, with registered businesses able to recover qualifying input tax. Consequently, raising VAT while reducing IMTT shifts part of the burden from payment activity towards consumption.

This redistribution is not neutral. A business making substantial electronic transfers may benefit from lower charges, while a household purchasing taxable products encounters the higher VAT rate. Businesses supplying exempt goods may also face different outcomes from those entitled to recover input tax.

The IMF's projections suggest that Treasury expected the VAT increase to compensate for the IMTT concessions and produce slightly more revenue. That does not mean every taxpayer became worse off, but it weakens the assumption that the announced reduction necessarily lowered Zimbabwe's aggregate tax burden.

For households already managing constrained disposable incomes, the relevant question is how much purchasing power remains after paying consumption taxes and other charges. Businesses face a similar calculation when assessing their total operating costs.

Treasury's latest search for alternative revenue therefore matters as much as the proposed IMTT reduction itself. If the Government compensates through another broadly applied levy, the intended relief could be substantially diluted.

Zimbabwe's taxation of imported digital services has introduced another dimension to the affordability of formal economic participation. The Digital Services Withholding Tax framework, introduced in January 2026, enables financial intermediaries to collect VAT on qualifying services provided by non-resident suppliers, including cloud computing, software subscriptions and digital advertising.

The mechanism is primarily intended to improve VAT collection rather than automatically impose a separate tax in addition to VAT already owed. Nonetheless, businesses purchasing foreign digital services can face higher effective costs, particularly where input VAT cannot be recovered.

For small enterprises, digital services are increasingly essential to maintaining accounting systems, advertising products, processing information and accessing international markets. Tax treatment that increases the final cost of these services can affect technology adoption and competitiveness, especially when combined with foreign exchange and banking charges.

The case for reform is consequently broader than abolishing every charge labelled a digital tax. It requires assessing how VAT collection, transaction levies and payment fees interact, identifying unnecessary compliance costs and examining how essential technology purchases are treated.

Removing VAT from imported digital services without considering the treatment of domestic providers could also create competitive distortions. A comprehensive review must therefore balance affordability, tax neutrality and the Government's revenue requirements.

The fiscal challenge is that IMTT supports expenditure in important public sectors. According to Treasury, more than 70% of the revenue collected through the levy has been allocated to infrastructure, healthcare, education and social protection.

These obligations cannot be disregarded, particularly given Zimbabwe's outstanding infrastructure and public-service requirements. Removing a significant revenue stream without accompanying financing adjustments could widen fiscal pressure or affect Government's capacity to meet existing commitments.

Yet preserving revenue through successive tax substitutions also carries economic costs. Businesses operating within formal payment systems already face a combination of statutory levies, compliance obligations and service charges, which can weaken competitiveness and encourage efforts to minimise transaction expenses.

A more sustainable reform would examine expenditure efficiency alongside revenue mobilisation. Procurement discipline, stronger tax administration, improved compliance and tighter control of avoidable public spending could contribute to fiscal space without placing every adjustment onto another group of taxpayers.

Such measures would require demonstrable savings rather than assumptions that administrative efficiencies can immediately replace IMTT collections. A phased reduction, supported by transparent revenue projections and expenditure targets, would provide a more credible basis for reform.

The policy objective should be to reduce unnecessary economic friction while preserving the resources needed for essential public services. That demands assessing total tax incidence rather than evaluating individual rates in isolation.

Zimbabwe's latest IMTT proposal recognises the pressure that transaction-based taxation places on businesses and households, but its effectiveness will depend on the fiscal decisions accompanying implementation.

January's experience demonstrated that Government can reduce one tax while recovering a comparable amount through another. The economic consequences vary across taxpayers, but the overall revenue requirement remains substantially unchanged.

Further IMTT reductions could support formal payments, business liquidity and commercial activity, particularly if accompanied by a wider review of consumption and digital transaction costs. However, those benefits would be weakened if replacement measures recreate similar financial pressure elsewhere.

Treasury has not announced the size of the proposed reduction or the taxes that might compensate for it. The immediate policy question is therefore not the merits of a specific new rate, but the structure of the eventual reform.

For Zimbabwean businesses and households, genuine relief will be measured by the reduction in their combined tax burden, not simply by the removal of percentage points from one levy. Without that distinction, another IMTT cut risks becoming a change in how Government collects revenue rather than a meaningful reduction in the cost of living and doing business.

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