By Advent Shoko
HARARE — Zimbabwe collected ZiG137.8 billion in revenue during the first half of 2026, with taxes on income and consumption providing much of the money, Finance Minister Professor Mthuli Ncube told Parliament on Thursday when he presented the 2026 Mid-Term Budget and Economic Review.
The figures from Treasury show that Value Added Tax (VAT) was the government’s biggest source of revenue, contributing 28.3%, followed by personal income tax at 16.6%, corporate income tax at 13.8% and excise duty at 8.5%.
Together, VAT and personal income tax accounted for 44.9% of total revenue, placing workers and consumers at the centre of Zimbabwe’s tax collection system.
That raises a question that goes beyond the headline numbers: how much of the government’s revenue is ultimately being carried by people who earn and spend money every day?
Ncube said the government’s fiscal position remained under control, with first-half expenditure at ZiG123.6 billion and the resulting cash savings used to service public debt and settle arrears owed to service providers.
“During the first six months, total revenue collections amounted to ZiG137.8 billion, while expenditure stood at ZiG123.6 billion. This resulted in cash savings, which were directed towards servicing public debt and settling arrears owed to service providers,” Ncube said.
Treasury says ministries, departments and agencies had used 42.5% of their approved 2026 budgets by June 30, and Ncube said there would be no need for a supplementary budget.
But beneath the fiscal discipline story is another reality: Zimbabwe’s government remains heavily dependent on taxes collected from formal economic activity.
VAT is carrying the biggest share
VAT generated 28.3% of first-half revenue, making it the largest single source of government income. VAT is a consumption tax, meaning it is ultimately borne through purchases of taxable goods and services.
For an ordinary Zimbabwean, the mechanism is easy to understand. You earn an income. You pay tax on that income where applicable. You then use what remains to buy goods and services, with VAT embedded in the price of many of those purchases.
This is why VAT can be such a powerful revenue-raising tool. The government does not need to collect it only from a relatively small number of high-income earners; it can collect it across a much wider stream of economic transactions.
Zimbabwe’s standard VAT rate is 15.5% in 2026.
The concern for households, however, is that consumption taxes can be difficult to avoid and can weigh heavily on people whose incomes are already under pressure.
PAYE: The tax workers see first
Personal income tax contributed 16.6% of government revenue during the first half.
For formally employed Zimbabweans, much of this tax is encountered through Pay As You Earn, or PAYE, which employers deduct from salaries before workers receive their net pay.
That creates an important relationship between salaries and government revenue. When salaries rise, the amount of income subject to tax also rise.
That does not mean a worker necessarily becomes poorer after a salary increase. But the increase in take-home pay can be smaller than the headline increase in gross salary, depending on the employee’s tax position.
This becomes more important when salary increases are largely designed to keep pace with rising living costs.
A worker whose salary rises by 20% may have more ZiG in the payslip, but if prices have also risen sharply, the real improvement in purchasing power may be much smaller.
And when tax thresholds do not keep pace with income and inflation, taxpayers can gradually find themselves paying more without feeling significantly better off.
That is the problem economists call fiscal drag.
Zimbabwe is not alone in relying on VAT and income tax
There is nothing uniquely Zimbabwean about relying on VAT, personal income tax and corporate income tax. These are among the main revenue sources used by governments around the world.
The difference is how heavily individual countries rely on each tax and how broad their overall tax base is. Zimbabwe’s first-half numbers show that taxes on income and spending are doing a large part of the work.
That is good for Treasury from a collection perspective because these taxes generate revenue continuously. But it also leaves the government highly exposed to the condition of households and formal businesses.
If businesses struggle, employment suffers.
If employment suffers, income-tax collections can weaken. If household spending falls, VAT collections also come under pressure.
The government’s revenue performance is therefore closely linked to the health of the economy.
Corporate tax brings in less than VAT and personal income tax
Corporate income tax contributed 13.8% of revenue in the first half. That puts companies firmly among the major contributors, but still behind VAT and personal income tax.
This distinction matters because one of Zimbabwe’s long-term challenges is broadening the economy’s formal productive base.
A bigger economy with more profitable companies, more formal employment and greater investment can generate more tax revenue without necessarily requiring government to keep raising tax rates.
In other words, economic growth can become a tax policy in itself.
More businesses create more taxable profits. More jobs create more taxable incomes. More production creates more transactions. And more transactions generate more VAT.
But Zimbabwe’s formal economy has been under growing pressure, making it harder to broaden the tax base. OK Zimbabwe, one of the country’s biggest supermarket chains, has closed a string of loss-making outlets and entered corporate rescue after falling revenues, mounting debt, stock shortages and cash-flow problems weakened its operations.
Excise duty adds another burden to consumers
Excise duty contributed 8.5% of first-half revenue.
These taxes are generally applied to selected products, meaning they can affect the price of specific goods and services.
When taxes on fuel and other widely used products rise, the effect can spread through the economy because higher transport and production costs can eventually be reflected in the prices paid by consumers.
That makes indirect taxation particularly important in Zimbabwe, where the cost of living remains a major concern for households.
So, are Zimbabweans being overtaxed?
The Treasury figures alone cannot prove that. Whether a country is “overtaxed” depends on much more than the amount collected.
It requires an assessment of tax rates, incomes, inflation, exemptions, the quality of public services and the size of the informal economy.
But the question is becoming harder to ignore.
Nearly 45% of Zimbabwe’s first-half revenue came from VAT and personal income tax combined.
That means people who earn and spend formally are carrying a substantial part of the government’s revenue burden.
Investment analyst Wafa Kuchera recently argued that Zimbabwe’s tax regime places excessive pressure on formal businesses and consumers.
“The Government needs to become more efficient and fiscally creative with what it collects to make the impact of taxes go further,” Kuchera said.
He also called for a review of taxes that disproportionately affect vulnerable households and compliant businesses, including some consumption taxes.
His argument is not that government should stop collecting revenue. It is that the economy needs to produce more revenue rather than simply asking the same taxpayers to shoulder more of the burden.
The informal economy complicates the picture
This is where Zimbabwe’s informal economy becomes important.
A large part of economic activity takes place outside the formal tax net, making it harder for Treasury to collect income and corporate taxes consistently. It’s difficult to tax vendors selling mitsvairo, vegetables and Mabhero on street pavements. Today they are here, tomorrow they’re moving.
The IMF has said Zimbabwe is working to improve taxpayer registration and compliance, including among VAT and PAYE registrants, while government has also been looking at ways of broadening the tax base.
Bringing more economic activity into the formal system could therefore allow government to raise more revenue without relying so heavily on the existing pool of compliant workers and businesses.
That is potentially a healthier route than continually increasing the burden on those who already pay.
Revenue is rising, but debt still consumes resources
Government’s first-half revenue performance was strong enough for Treasury to say the budget remained fully financed.
Ncube said the ZiG137.8 billion collected compared with ZiG123.6 billion in expenditure, allowing government to use the cash difference for debt servicing and arrears clearance.
But the detailed expenditure figures supplied for the review show that loan repayments of ZiG15.5 billion were recorded separately. That means the broader expenditure picture rises to about ZiG139.1 billion when loan repayments are included.
The distinction is important.
The government can legitimately describe the ZiG14.2 billion difference between revenue and expenditure-and-net-lending as a cash saving, while the wider financing requirement remains much tighter once debt repayments are included.
It is another reminder that Zimbabwe’s debt burden continues to influence how much money Treasury has available for new programmes.
Where is the money going?
The government says it spent ZiG27.2 billion on social services during the first half of the year.
Education received the largest share at ZiG16.9 billion, followed by health at ZiG9.5 billion and social protection at ZiG832 million.
Ncube said the social protection money supported vulnerable households, children, persons with disabilities, older people and other disadvantaged groups.
“Treasury disbursed a total of ZiG832 million towards programmes supporting vulnerable households, children, persons with disabilities, the elderly, and other disadvantaged groups,” he said.
Government also spent ZiG11.8 billion on infrastructure, including transport, water and sanitation, ICT, health and housing.
Water and sanitation received ZiG4.9 billion, transport ZiG3.9 billion, while ICT received ZiG506.7 million.
526 boreholes added
The government’s water programme also received significant funding. A total of ZiG4.9 billion went towards dam construction and the Presidential Borehole Drilling Programme.
Government says 526 new boreholes were drilled during the first half, taking the reported national total to 5,395. The investment comes as government prepares for the possibility of an El Niño-related drought during the 2026/27 agricultural season.
Electricity generation beats target
The energy sector also performed above expectations. Electricity generation reached 4,774.2 gigawatt-hours in the first six months, 7.8% above target, according to Ncube’s review. Government says the improvement helped reduce load shedding.
Rural Electrification also invested US$13.8 million, completing 266 projects benefiting schools, health centres and rural communities. Reliable electricity matters for government revenue too.
The more factories, mines, farms and businesses produce, the more economic activity Treasury can ultimately tax.
Government still carrying a huge debt burden
As at June 30, Zimbabwe’s public and publicly guaranteed debt stood at ZiG580.9 billion, equivalent to about US$21.7 billion.
During the first half of the year, government paid US$170 million towards external debt obligations and ZiG15.3 billion towards domestic debt.
Treasury also raised ZiG6.7 billion through Treasury Bills and domestic loans. This explains part of why revenue collection matters so much. The government is not only financing today’s services.
It is also trying to manage the financial legacy of past borrowing while clearing arrears and rebuilding credibility with creditors.
Budget execution is uneven
Although overall budget utilisation stood at 42.5%, the detailed figures show large differences between ministries and institutions.
The Zimbabwe Electoral Commission (ZEC) had used 89% of its annual allocation by mid-year.
Finance was at 69%, Defence at 51%, while Lands, Agriculture, Fisheries, Water and Rural Development stood at 47%.
At the other end, Public Service, Labour and Social Welfare had used just 8%, Mines and Mining Development 10%, and Environment, Climate and Wildlife 11%.
Some institutions had already exceeded their original allocations.
The Office of the President and Cabinet (OPC) recorded expenditure equivalent to 143% of its annual budget, while Transport and Infrastructural Development reached 108%.
Those figures do not automatically indicate wrongdoing. They do, however, show that actual spending priorities are not always moving at the same pace as the original budget.
Government says there will be no supplementary budget
Despite those variations, Ncube said Treasury believes the approved 2026 Budget is sufficient for the rest of the year.
“The approved budget remains adequate to cover planned programmes and projects through to the year’s close, without the need for a Supplementary Budget,” Ncube said.
The IMF has also welcomed Zimbabwe’s stronger fiscal performance and the authorities’ commitment to keeping spending within the approved 2026 budget, while emphasising the need for stronger public financial management and arrears clearance.
The bigger question: Can Zimbabwe grow its way out of the tax problem?
Zimbabwe needs revenue to pay teachers, nurses and other public workers, build roads, provide water, support agriculture, service debt and protect vulnerable households.
But if too much of that money comes from the same workers and consumers, the tax system can become increasingly difficult for households and businesses to absorb.
The alternative is a broader and more productive economy.
- More formal jobs.
- More companies.
- Higher exports.
- More investment.
- Greater industrial capacity.
- A larger formal tax base.
That is the route by which government can collect more revenue without necessarily making every existing taxpayer pay more.
Zimbabwe’s economy is projected to grow by 5% in 2026, following growth of 8.3% in 2025, with agriculture and mining among the main drivers.
Treasury also reported stronger foreign-currency receipts, rising exports and improving economic activity during the first half. The opportunity now is to turn that growth into a broader revenue base.
What the numbers really mean for ordinary Zimbabweans
The ZiG137.8 billion headline may sound like a government success story. In one sense, it is.
Treasury collected more revenue than it spent on core expenditure and net lending during the first six months, maintained budget execution within its approved framework and says there is no need for a supplementary budget.
But there is another side to the same story. VAT and personal income tax alone supplied nearly half of government revenue.
That means the government’s fiscal strength is closely linked to the purchasing power of consumers and the earnings of workers. For Zimbabweans, the real test is therefore not just how much Treasury collects.
It is whether the revenue system is broad enough to be sustainable, whether taxes remain affordable and whether the money collected translates into better public services and stronger economic growth.
As Kuchera put it, the challenge is to make the impact of every dollar collected “go further.” That may be the central fiscal challenge for the rest of 2026:
Zimbabwe needs Treasury to collect enough, without continually asking the same people to pay more.
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