HARARE – Prices of basic goods and services are set to surge following Finance Minister Mthuli Ncube’s announcement on Thursday that Value-Added Tax (VAT) will be increased, a move expected to intensify the financial strain on ordinary Zimbabweans already grappling with high living costs.
Unveiling the 2026 National Budget, Ncube revealed that VAT would rise to 15.5%, a hike the government says is essential to raise an additional US$1.47 billion in revenue next year. Treasury forecasts project total revenue collection of US$9.4 billion for 2026, up from US$7.93 billion in 2025. While the increase is presented as a fiscal necessity aimed at bolstering government resources, many citizens fear it will exacerbate existing economic pressures and push basic commodities further out of reach.
VAT is a consumption tax levied on nearly all goods and services, including groceries, toiletries, transport fares, and household essentials. Unlike income tax, which targets earnings, VAT affects every consumer regardless of income level. This means that low- and middle-income families will bear the brunt of the increase, paying more for staples such as mealie-meal, cooking oil, sugar, and bread. Businesses, particularly in the formal retail sector, typically pass VAT directly onto consumers, ensuring that price hikes are felt almost immediately across the supply chain.
The timing of the increase has triggered concern among economists, consumer advocates, and everyday citizens. The hike coincides with the release of the Zimbabwe Tax Perception Survey 2025, which found that nearly nine in ten respondents believe the tax burden far exceeds their ability to pay. Conducted by the Zimbabwe Taxpayers Platform, the survey revealed widespread frustration with what many perceive as an overtaxed society, where statutory levies and multiple taxes erode disposable incomes, reduce consumer spending, and stifle business growth.
Mthuli’s Actions Push Up Prices of Basic Necessities
Critics argue that VAT increases are particularly regressive, as they disproportionately affect lower-income households. While the government has indicated that part of the increase could allow for a partial reduction of the intermediated money transfer tax (IMTT), analysts say any relief is likely to be minimal. For most households, the additional cost on daily essentials will outweigh any marginal savings on financial transaction taxes.
In addition to the direct impact on consumers, businesses in the formal sector face the administrative burden of collecting and remitting VAT. Only 23.9% of the economy is considered compliant with formal tax requirements, meaning that the informal sector — where a majority of Zimbabweans operate — continues to pay indirectly through higher retail prices without contributing directly to government revenue. This dynamic effectively transfers the economic burden from businesses to the broader population, hitting those with the least capacity to absorb additional costs.
Economic analysts warn that the VAT increase comes at a time when Zimbabweans are already struggling with stagnant wages and persistent inflation. With salaries failing to keep pace with rising prices, households are expected to experience further erosion of purchasing power. The knock-on effect is likely to push retail prices higher, as suppliers adjust for increased tax liabilities, thereby compounding the cost-of-living crisis.
Consumer advocacy groups have expressed alarm, warning that the VAT hike could trigger a surge in poverty and food insecurity. “This increase will hit the most vulnerable hardest,” said one economist. “For families who are already spending a significant portion of their income on basic food and household items, a VAT increase of this magnitude will leave them with even less disposable income and push many deeper into economic distress.”
The government, however, defends the measure as a necessary step to ensure fiscal stability, fund public services, and maintain essential infrastructure. Officials argue that without additional revenue, key sectors including health, education, and social welfare could face funding shortfalls. They maintain that the VAT adjustment is part of a broader strategy to strengthen the economy and improve revenue collection, while also signaling a partial easing of other taxes such as the IMTT.
Despite these assurances, the reality for most Zimbabweans is a rising cost of living. From groceries to fuel and transport, every aspect of daily life is expected to become more expensive. With the increase set to take effect immediately, households are bracing for the financial impact, seeking ways to adjust budgets, cut non-essential spending, and cope with shrinking purchasing power.
As Zimbabwe enters 2026 with this new VAT rate, economists warn that the move could deepen economic hardship for millions, particularly low-income earners, while doing little to address structural economic challenges. For ordinary citizens, the message is clear: the cost of everyday life is set to rise, placing additional strain on households already stretched to their limits.
Source- ZimEye
-
-
-
-
-
-
-
-
-
-
