Finance Minister Mthuli Ncube unveiled the 2025 national budget on Thursday, a document brimming with both novel revenue-raising measures and adjustments to existing tax structures.
The budget, presented to a nation grappling with persistent economic challenges, introduces a range of initiatives aimed at boosting government coffers, but some economists have already expressed concerns about the potential impact on ordinary Zimbabweans.
One of the most striking proposals is a 10 percent withholding tax on winnings from sports betting, effective from January 1st, 2025.
Minister Ncube justified this measure by acknowledging the widespread popularity of sports betting in Zimbabwe, stating: “Honourable Members would be aware that betting is popular in nature, as indicated by the proliferation of sports betting houses countrywide. Sports betting punters receive income from winnings, which is currently not taxable under personal income tax. To include punters in the tax base, I propose to introduce a 10 percent withholding tax on gross winnings of sports betting punters, with effect from January 1, 2025.”
The budget also targets the fast-food industry with a new 0.5 percent tax on sales, applicable to a range of items including pizza, burgers, hot dogs, shawarma, French fries, chicken, doughnuts, and tacos. This tax, also effective from January 1st, 2025, is presented as a measure to promote healthier eating habits.
Ncube explained: “Highly processed food has been identified as one of the factors responsible for the prevalence of obesity and associated non-communicable diseases, hence, the need for government to promote responsible consumption of such foods. It is envisaged that the proposed tax will go a long way in encouraging operators to adopt culinary that promote healthy eating.”
However, the budget isn’t solely focused on new taxes. Minister Ncube announced a reduction in the special surtax on beverages’ sugar content, initially introduced in February 2024.
He explained the rationale behind this adjustment: “The government, in February 2024, introduced a special surtax of US$0.001/g on added sugar contained in specified beverages. Representations from manufacturers indicate that cordials, due to their concentrated nature, have a higher sugar content, hence, attract a higher effective tax as compared to ready-to-drink beverages. Common practice, however, requires that the tax be based on the sugar content of the diluted product. In order to create a level playing field between ready-to-drink and cordials, I propose to review the Special Surtax on Beverages’ Sugar Content on cordials from US$0.001/g to US$0.0005/g, with effect from January 1, 2025.”
The informal sector also finds itself under increased scrutiny. Minister Ncube announced plans to bring more small businesses into the formal tax net, targeting businesses such as grocery shops, hardware stores, boutiques, spare parts dealers, car dealers, and lodges.
He stated: “A survey into the operations of selected enterprises from the emerging sector shows that a number of operators are engaged in significant economic activities, hence, qualify to contribute to the fiscus through personal and corporate income taxes, as opposed to presumptive tax. I propose that the above-mentioned operators be mandated to regularise registration of their operations with the Zimbabwe Revenue Authority, transact through point-of-sale machines and maintain records of all transactions by January 1, 2025.”
Non-compliance will result in temporary business closures and significant penalties. For example, non-compliant hardware stores face potential quarterly corporate tax bills ranging from US$9,000 to US$15,000. Furthermore, individuals who have converted residential properties into business properties will now be subject to a 25 percent rental income tax. Landlords will also be required to disclose rental income details to ZIMRA.
The budget also includes a freeze on government recruitment, a move justified by the current employment costs exceeding the fiscal rule threshold.
Ncube explained: “To address this unsustainable position, revenue enhancement measures will be implemented, whilst also limiting the recruitment of additional personnel only to critical sectors such as health and education.” This decision is further supported by a recent job evaluation exercise aimed at streamlining the civil service.
Offering a glimmer of positive news, Ncube announced revisions to tax bands following the recent devaluation of the Zimbabwean dollar, aiming to provide some relief to taxpayers. The new tax-free threshold is set at ZWL 2,800 per month.
The budget projects revenues of US$7.5 billion against expenditures of US$7.7 billion for 2025, with an anticipated economic growth rate of 6 percent in 2024, up from 2 percent in 2023.
However, economist Tinashe Murapata expressed scepticism regarding these growth projections, stating: “He argues that Zimbabwe will be one of the fastest growing economies in the world and yet at the same time introduces hefty consumer taxes.” This comment highlights the concerns surrounding the budget’s potential impact on consumer spending and overall economic growth.
