Environmental and fiscal objectives of carbon tax

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Simbarashe Hamudi

ZIMBABWE’S carbon tax framework continues to play a central role in the coun­try’s environmental and fiscal poli­cy, with clear legal provisions gov­erning who must pay, how the tax is collected, and the penalties for non-compliance. Enshrined in stat­utory provisions under the Finance Act, the carbon tax applies pri­marily to petroleum products and certain motor vehicles, forming part of the government’s broader efforts to manage emissions while generating revenue for national de­velopment.

The carbon tax is structured around a detailed schedule that defines key terms, identifies liable persons, and sets out procedures for payment and enforcement. At its core, the tax applies to petro­leum products imported into or used within Zimbabwe, as well as to motor vehicles registered out­side the country but operating lo­cally.

Under the law, a “petroleum product” includes leaded or un­leaded petrol, diesel fuel designed for compression-ignition engines, and any refined petroleum capa­ble of being used as motor spirit. However, aviation fuel, illuminat­ing paraffin, and power paraffin are expressly excluded from the defi­nition. This distinction narrows the tax base to fuels most commonly associated with road transport and internal combustion engines.

Entities liable to pay carbon tax include oil companies and other persons or entities engaged in oil procurement. These are companies or individuals licensed or autho­rised by the ministry responsible for energy importing petroleum products in bulk or purchase or im­port them for resale. The National Oil Company of Zimbabwe (Pri­vate) Limited, known as Noczim, is specifically referenced in the law, alongside any other State oil procurement entity formed in addition to or in substitution for Noczim.

When such companies import petroleum products, they are re­quired to pay the prescribed carbon tax to the Zimbabwe Revenue Au­thority (Zimra) at the port of entry. Payment must be made at the time the fuel enters the country, ensuring that the tax is captured upfront in the supply chain. This mechanism allows the tax to be embedded in the cost structure of fuel before it reaches retailers and consumers.

The minister responsible for fi­nance retains discretion to exempt certain projects from liability. In particular, power generation proj­ects, as defined under the Finance Act, may be exempted from carbon tax either temporarily or indefinite­ly. Such exemptions must be pub­lished by notice in the Government Gazette and may be backdated, of­fering flexibility in support of stra­tegic energy initiatives.

Beyond bulk importers, the car­bon tax regime also directly affects visitors to Zimbabwe. Any visitor who uses within Zimbabwe a mo­tor vehicle registered outside the country is required to pay carbon tax upon entry and for each month or part thereof during which the vehicle remains in Zimbabwe. This requirement applies regardless of whether the visitor is a tourist, business traveller, or cross-border trader.

Visitors must pay the tax in for­eign currency, specifically in Unit­ed States dollars, Euros, or any other currency permitted under the Exchange Control (General) Or­der. Where payment is made in a currency other than United States dollars, the applicable exchange rate is determined by reference to the Exchange Control (Exchange Rate) Direction or the prevailing international cross rate. Payment by visitors may be made at any port of entry or at a branch or di­vision of Zimra responsible for tax assessment and collection. If a vis­itor remains in Zimbabwe longer than originally declared and paid for, he or she must settle the ad­ditional carbon tax liability before leaving the country. Failure to do so attracts financial penalties.

The penalty for non-compliance by visitors is set at two percent of the carbon tax due for every week or part of a week during which the default continues. This penalty accrues cumulatively and may be recovered by the Commissioner through court action. The imposi­tion of a weekly percentage pen­alty underscores the authorities’ intention to discourage delays or evasion.

A central feature of the carbon tax system is the issuance of a car­bon tax receipt, also known as a carbon tax certificate. Every liable person must complete a prescribed form when paying the tax. Upon payment and completion of the required documentation, the cer­tifying authority issues an official receipt as proof of compliance.

This receipt serves as a critical enforcement tool. Police officers are empowered to demand produc­tion of a valid carbon tax receipt from any liable person operating a motor vehicle subject to the tax. The receipt must be presented upon request as evidence that the tax has been paid.

If a receipt is lost, destroyed, defaced, or becomes illegible, the holder may apply to the issuing au­thority for a duplicate. A prescribed fee may be charged for the issu­ance of a duplicate receipt. This provision ensures that genuine taxpayers are not unduly penalised for administrative mishaps, while maintaining the integrity of the en­forcement process.

Failure to produce a carbon tax receipt when required constitutes a criminal offence. Any person in charge of a motor vehicle liable for carbon tax who cannot produce the receipt, whether or not he or she is the actual liable person, may be fined an amount equal to the car­bon tax payable for that vehicle. In default of payment, the offender may face imprisonment for a peri­od not exceeding six months.

However, the law provides some flexibility. If the failure to produce the receipt is due to its loss or de­struction, rather than non-payment, a police officer or Zimra official may require the driver or vehicle owner to produce a duplicate re­ceipt within seven days at a speci­fied location. This safeguard distin­guishes between deliberate evasion and administrative oversight.

In certain cases, a person ac­cused of failing to produce a re­ceipt may admit guilt on the spot by signing a document to that ef­fect and paying a fine equal to the amount of carbon tax payable for the vehicle. Upon payment of the fine, the individual will generally not be required to appear in court, subject to procedures under the Criminal Procedure and Evidence Act. The Zimbabwe Republic Po­lice are required to furnish the Commissioner with particulars of every person who has compound­ed or been convicted of such an offence.

Taken together, these provisions reveal a carbon tax regime that combines environmental policy objectives with strict compliance mechanisms. By taxing fuel im­ports and foreign-registered vehi­cles, the government seeks both to internalise the environmental cost of carbon emissions and to ensure that all users of Zimbabwe’s road infrastructure contribute to public revenue.

As Zimbabwe continues to bal­ance economic growth with envi­ronmental sustainability, the car­bon tax remains a key instrument in aligning fiscal policy with cli­mate considerations. With clearly defined liabilities, foreign currency payment requirements, and robust enforcement powers, the frame­work signals the authorities’ deter­mination to maintain compliance and strengthen revenue collection in a critical sector of the economy.

Hamudi is a Tax Partner at Baker Tilly. He can be contacted at simbarashe.hamudi@baker­tilly.co.zw / 0775 399 536