Africa-Press – Zimbabwe. THE Zimbabwe National Chamber of Commerce (ZNCC) has implored the government to expedite payments to its contractors to avert a liquidity crisis that could exacerbate tax compliance issues.
The delays stem from Treasury’s value-for-money expenditure monitoring programme, introduced to scrutinise and control payments to its suppliers.
The policy, meant to curb inflated invoices and protect the value of the Zimbabwe Gold currency by limiting money supply, has seen ministries withhold disbursements to suppliers and contractors until the verification process is complete.
However, business member organisations (BMOs) warn that the resultant payment backlog has created cash flow constraints across key sectors such as construction, agriculture, and mining services.
Economic analysts say the payment gridlock has effectively trapped liquidity within government accounts, starving the private sector of working capital and slowing tax remittances.
“Delayed payments to government contractors strain private sector liquidity. Unpaid export surrender balances make exporting less competitive and add to an unfavourable debt position,” ZNCC said in its latest newsletter.
“Contractors’ and exporters’ cash flow challenges reduce tax compliance, worsen arrears and stifle business growth.
It proposed a contractor payment clearing system that requires all certified government invoices to be settled within 90 days and the issuance of tradeable Treasury Bills for arrears, deductible against tax liabilities.
ZNCC said after the 2025 gross domestic product (GDP) rebasing, Zimbabwe’s tax-to-GDP ratio fell to about 14% from 18%.
This, it said, was below the Sadc convergence target of 25% and the 22-25% median for middle-income countries.
“Non-tax revenue contributes only 4% of total collections, leaving 96% from taxes in a highly informal economy,” ZNCC said.
“Current rates of 2% on transactions [intermediated money transfer tax or IMTT] increase costs, distort supply chains, and encourage cash usage amid efforts by the Reserve Bank of Zimbabwe to move towards a cashless society.
“For VAT [value added tax], the government moved most of the products to the exempt category; one cannot claim input tax (15%), unlike for zero-rated and standard-rated products. This obviously increases the cost of doing business (covered under Statutory Instrument 15 of 2024 and Statutory Instrument 248 of 2023).”
ZNCC noted that formal businesses carry a disproportionate tax burden, undermining competitiveness in the regional market.
It said a narrow base amid high tax heads incentivised informality, reducing compliance and fairness.
ZNCC said the move creates severe liquidity strain on businesses, erosion of VAT neutrality, and loss of confidence in tax administration. ZNCC said the move created “unnecessary cash flow mismatches where government owes companies more than companies owe government”.
The BMO proposed the scrapping of the IMTT, saying it discouraged the use of electronic platforms, deepening a cash economy.
ZNCC recommended a repeal of section 4A of the Finance Act and Section 38(4) of the VAT Act, which compels companies to pay tax or duty in the currency of trade.
It wants authorities to allow the offsetting of input and output VAT across currencies using the prevailing exchange rate, and expedite VAT refund processing by introducing risk-based audits and publishing timelines.
Last month, ZNCC met with the Treasury and the Zimbabwe Revenue Authority to present the chamber’s recommendations and expectations for the forthcoming 2026 National Budget Statement.
Key areas highlighted in the submission included anchoring macroeconomic stability and fiscal discipline through the timely settlement of the government’s arrears and improved management of public debt.
ZNCC also mentioned reforming the tax framework to enhance equity, broaden the base, and streamline VAT and IMTT processes to reduce the cost of doing business.
Others include “promoting industrialisation and value addition, particularly within agro-processing, mining beneficiation, and manufacturing value chains; improving border efficiency and trade facilitation to combat smuggling, reduce corruption, and enhance regional trade competitiveness; supporting formalisation and regulatory reform, with emphasis on lowering compliance costs and creating a more enabling business environment.”
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