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When anybody hides his/her income from the government and does not report the actual income to evade taxes, the hidden income then becomes black money. There are many other softer terms to denote the same thing, such as undisclosed income, unreported income, covered income, etc.[1]


There are many ways how black money is created. The most common is through illegal professions, such as drug trafficking, prostitution and activities that are deemed as criminal offences in the eyes of law. Black money can also be created by corrupt individuals who have enormous power and who earn a substantial part of their income by abusing their power. Black money is also created through evading taxes by businessmen, corporates, professionals and celebrities, etc.

Effects of Black Money in Zimbabwe

Rampant corruption in political, social, and economic spheres of development has been the core driver of economic meltdown over the past two decades in Zimbabwe. In response, the Zimbabwean economy went through an economic depression whose impacts are widespread. The associated economic and humanitarian crisis has limited the ability of the state to mobilise resources to finance its own development.

On the other hand, the huge external debt burden further exposed Zimbabwe’s vulnerability for its over reliance on external resources. This left the country with no other option but to look inward in terms of mobilising resources. Taxation became the ultimate source of revenue coupled with domestic debt which rose from US$276 million in 2012 to US$9.2 billion as of December 2019. Both external and domestic debts (National Debt in Zimbabwe) affected the country’s debt profile and the government had to minimise the issuance of treasury bills (Government Bonds).

Pursuant to the rising social, economic and infrastructure needs, the government introduced additional taxes including the infamous Intermediated Money Transfer Tax (IMTT) commonly known as the 2% tax. However, the ability of the revenue authority to mobilise resources is undermined by leakages associated with tax evasion, avoidance, and corruption. Whilst taxation cements the social contract between the government and the citizens, rising corruption has affected tax compliance. The Reserve Bank of Zimbabwe estimates that the country lost US$3 billion between 2015 and 2017 to illicit financial flows. Corruption acts as both a source and an enabler of illicit financial flows. Therefore, the fight against corruption should remain a priority for the Government of Zimbabwe in order to safeguard public resources.[2]

Corruption in tax administration

The impact of corruption on tax administration attracts wide debate not only in Zimbabwe but globally. A 2019 report by the International Monetary Fund (IMF) revealed that curbing corruption in all countries would result in an additional US$1 trillion in tax revenue annually across the world. It is estimated that developing countries loose US$1.26 trillion annually due to corruption, bribery, theft and tax evasion. In 2018, the Government of Zimbabwe (GoZ) launched a Transitional Stabilisation Programme (TSP) in a bid to set the economy on a recovery path. The TSP recognises the role of domestic resource mobilisation in financing the transformation of the Zimbabwean economy towards upper-middle-income status by 2030.

Taxes are a major source of Government revenue. Revenue through tax has on average contributed 88.1% between 1980 and 1989, and about 89% between 1990 and 1999, before peaking at 98% in 2005. More recently, according to the 2020 Midterm Fiscal Review, taxes constituted 97,6% of Government revenue. Despite these figures clearly showing that taxes are the source of resource mobilisation to finance expenditures by the GoZ, tax administration in the country is marred by a lack of transparency and corruption. The paradox over the years has been the increasing rate of informalisation of the economy. With the increasing levels of informalisation compounded by a challenging macro-economic environment, three things remain clear;

  • The levels of informalisation are associated with tax evasion, tax avoidance and corruption.
  • With the private sector challenged by the deteriorating macro-economic challenges and stifling business environment, tendencies for corruption, tax evasion and tax avoidance are high.
  • The GoZ’s scope to domestically mobilise revenues through formal channels is challenged by the informalised economy.

The essential objective of tax administration is to ensure the maximum possible compliance by taxpayers with their taxation obligations. Therefore, a robust tax administration system ensures the collection of the right amount of tax at the right time, at minimal cost to the government, while imposing the least burden on taxpayers. However, corruption continues to worsen the country’s macro-economic situation, with inflation at one time reaching 837%. Good governance which encompasses the absence of systemic corruption, is therefore vital for macro-economic stability as well as sustainable and inclusive economic growth. According to the IMF, the resulting damage of corruption on tax compliance, revenue collections and respect for the wider tax system can be chronic, and the 'effects in shaping its real incidence profound.' However, a problem affecting studies measuring the impact of corruption on tax administration is that corruption is difficult to detect and quantify because by its very nature, it is illegal and secretive.

Causes of corruption in tax administration

The economic environment as proxied by poverty, inflation and economic volatility was regarded as the major cause of corruption in tax administration. Given the challenging macroeconomic environment and highly informalised economy, worsened by increasing poverty most economic players (individual and private business) are in a survivalist mode. According to the World Bank (2018), Zimbabwe ranked the third (60.6%) at international level in terms of the share of shadow economy (informal economy) after Georgia and Bolivia.

It is generally accepted that as the size of the informal economy grows at the expense of the official economy, government's tax revenue base is further eroded. The higher the levels of informalisation, the greater the tendencies for business operations to go under the tax radar and the higher the prevalence of corruption, as small businesses and other informal economy operators evade paying taxes which they regard as proportionately too high for business viability.

The inefficient tax administration system. Inefficient tax administration in this case referred to porous corruption system, loopholes in the tax collection system and slow tax clearance at boarders.

Impunity, politics, and bad governance. Respondents to a research by Transparency International Zimbabwe (TIZ) stated that they were of the view that political leadership sustains and often creates and protects corruption. They indicated that the impunity afforded to politically exposed persons and the elites has resulted in the spread of corruption even at lower levels. The catch and release approach coined by citizens indicates the perception of citizens towards the country’s seriousness in combating corruption in general. The overall result has been the weakening of voluntary tax compliance. A case in point was the controversial case of the importation of Isuzu vehicles worth more than US$8 million by the ruling party.

Lack of effective tax enforcement mechanisms. Tax enforcement typically refers to an act of ensuring that taxpayers comply with tax laws or rules, ranging from ensuring strict adherence to timely filing, accurate filing, to payment of tax liability as and when due. Some respondents believed that even when officials are arrested, the lack of stiffer penalties as laid out in Zimbabwe's anti-corruption laws makes taxpayers prone to exploitation.

Low wages of tax administrators/ officials. Low wages was also cited as one of the drivers of corruption in tax administration. Employees are forced to engage in corrupt activities such as bribes and extortion to supplement their wages and salaries.

High taxes and complex tax procedures. Small business operators and those within the informal economy bemoaned high tax levels as one of the push factors driving them to offer bribes for their goods to pass through the official system through tax evasion.

Information asymmetry. Citizens’ lack of knowledge on the roles, functions, duties of public officials, including anti-corruption strategies by responsible tax administration institutions, has resulted in increase in corrupt behaviour of tax officials. For example, only a few respondents to a research by TIZ had knowledge of Zimbabwe Revenue Authority (ZIMRA)'s on the zero-tolerance policy.

Examples of tax evasion cases in Zimbabwe

  • Businessman Genius Kadungure’s company, Piko Trading Group, was on 9 July 2020 found guilty by a Harare magistrates on two counts of tax evasion involving nearly $3 million. Piko Trading, which supplies gas, was charged with two counts of tax evasion and smuggling while Kadungure faces allegations of failing to declare income tax amounting to $119 860 in his personal capacity. Kadungure, representing his company, admitted to failing to pay VAT between February 2009 and May 2016, prejudicing Zimbabwe Revenue Authority (ZIMRA) of $2 512 149. The company also admitted to failing to declare company tax leaving ZIMRA $355 559 short. This was after Piko Trading had pocketed $24 187 026. According to the penalty provisions, Piko Trading was likely to be ordered to pay the shortfall in taxes plus a fine equivalent to the shortfall, plus interest.[3]
  • Earlier in 2019, the government admitted that only a third of gold produced in Zimbabwe is sold through official channels with Fidelity Refiners & Printers being the sole buyers of the precious mineral. The bulk of the gold worth over US$1,5 billion is lost through either under-declaring of mineral exports and smuggling cartels that connect the entire value chain from small-scale miners to international buyers. Under-declaration of goods is whereby importers misrepresent the quantity of goods they are importing or exporting in a bid to avoid paying the correct taxes, while, on the other hand, false classification of goods involves a situation whereby importers present false goods on documentation to the tax officers for purposes of evading paying the correct taxes.[4]
  • Henrietta Rushwaya was arrested on 28 October 2020 in connection with the 6kg of gold seized at the Robert Mugabe International Airport while she allegedly tried to smuggle it to Dubai. The gold is estimated to be valued at US$333 000 and this is a case of no tax coming into the coffers of the state since this is an act of tax evasion since nothing was to be declared to ZIMRA.[5]


  1. Mabroor Mahmood, [1], The Financial Express, Published: 12 April, 2016, Accessed: 5 November, 2020
  2. [2], Weekend Digest - Transparency International Zimbabwe, Published: 25 September, 2020, Accessed: 5 November, 2020
  3. Nyore Madzianike, [3], The Herald, Published: 10 July, 2020, Accessed: 5 November, 2020
  4. Victor Bhoroma, [4], Zimbabwe Independent, Published: 21 June, 2019, Accessed: 5 November, 2020
  5. [5], Chronicle, Published: 29 October, 2020, Accessed: 5 November, 2020