Key Points
- Ncube admits businesses in Zimbabwe are more profitable when they avoid compliance with taxes and regulations.
- Zimbabwe’s informal economy has surged to 76.1%, reflecting widespread evasion and the collapse of formal business structures.
- The government plans to expand the tax base despite concerns it could deepen informality without first cutting compliance costs.
Mthuli Ncube, the Minister of Finance, has made a remarkable admission: Zimbabwe’s regulatory structure is so dysfunctional that corporations make more money by breaking the law than by following it.
During the 2025 Mid-Term Budget Review in Parliament, he said that enterprises are increasingly working outside of formal frameworks, which shows how the economy is getting worse.
Ncube told MPs, “In some sectors, private companies can only make money if they don’t follow the rules.” “They lose money if they follow the rules, and that needs to change.”
The Zimbabwe National Statistics Agency reported that the informal sector’s share of the GDP grew from 60% in 2024 to 76.1% this year.
The change shows that a lot of people are leaving the formal economy because of high taxes, regulatory problems, and unstable policies.
Ncube Pledges Reforms but Vows to Expand the Tax Net
Ncube mentioned that the government aims to widen its tax base, even though he admitted that the economic environment is tough.
The drive comes after spending in the first half of the year rose to ZiG98 billion ($3.7 billion), which was more than what was planned.
Ncube is committed to reviewing regulations sector by sector, starting with agriculture, to ease business worries. He added that the government would lower licensing prices, make it easier for businesses to follow the rules, and cut down on the number of steps they have to take.
The Finance Minister also laid out a number of steps to make tax enforcement stricter, even though improvements are planned.
These steps include making tax administration digital, addressing loopholes that people exploit to avoid paying taxes, and including informal sector workers in the formal economy through financial inclusion programs.
Business Groups Warn of Rising Costs, Risk of Deeper Informality
However, economists and business leaders warn that adding more people to the tax base without first making it easier to comply could make Zimbabwe’s economic problems worse.
Economist Chenayimoyo Mutambasere remarked, “They’re saying it’s expensive to do business in Zimbabwe because the compliance routes are just too expensive.”
The Confederation of Zimbabwe Industries and the Chamber of Mines, among other industry groups, have regularly asked for tax breaks.
According to Zimfact, Zimbabwe has about 50 separate taxes and fees that are set by different laws. Many people think this is bad for economic growth.
Ncube maintained that the government is working with stakeholders to address tax system issues and devise a medium-term revenue plan.
The goal is to raise tax collection to between 22% and 25% of GDP by 2030, which would put Zimbabwe in line with middle-income countries. Companies that want rapid regulatory relief will have to wait for now, though.
