Africa-Press – Zimbabwe. Players in the small and medium enterprises (SMEs) sector have bemoaned the recently introduced government measures meant to formalise the informal sector saying they will push them out of business.
Over the years, Zimbabwe’s informal sector has grown to contribute an estimated 70% of economic activity but the growth has not translated to significant fiscal revenue thereby pushing the government to introduce measures to ensure compliance.
SMEs with US$25 000 yearly income are now required to register for value-added tax (VAT).
Formal businesses are now restricted from doing business with informal traders without VAT licences.
Small and Medium Enterprises Association of Zimbabwe executive director, Farai Mutambanengwe said the tax regime “criminalised” most of the informal sector.
He made the remarks at the Unpacking the Finance Act seminar held last Friday hosted by the Women Affairs, Community, Small and Medium Enterprises Development Ministry. Said Mutambanengwe (via NewsDay):
It looks like this tax regime is criminalising most of the informal sector. It’s not the issue of us not wanting to pay but the tax regime is quite radical.
The thing is if you look at the people selling on the streets, how are they going to pay those taxes? The city council will only have a lot of people to run after. This system will push the SMEs into non-compliance.
The policies that you are also implementing, are continuously increasing the number of taxations and they are going to facilitate the shunning of tax payments continuously.
We, as MSMEs, are trying to grow but these taxes are choking businesses. We are going to sink rather than grow to develop the economy.
The tax regime was supposed to be gradually implemented to avoid choking the sector.
The approach of the tax system should be gradual. The taxation system should be simplified so that they can understand.
The taxes are quite complicated, and we need to understand where they are coming from.
As SMEs, we are just trying to make a living and we try to formalise our businesses as well. We want to comply, but some of these taxes are unreasonable.
Some of these entrepreneurs do not even know the benefits of being formal. They need to be educated.
According to the 2022 Labour Force Survey published by the Zimbabwe National Statistics Agency (ZIMSTAT), over 2.8 million Zimbabweans derived their living from the informal sector compared to 495 000 in formal employment.
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