‘Informal sector tax will enhance resource mobilisation’

By Mirriam Mangwaya | May. 8, 2023 | 2 Min read

Zimbabwe Informal Sectors Organisation executive director Promise Mkwananzi

GOVERNMENT has been urged to start taxing the informal sector after Zimbabwe was ranked the second most informalised economy in the world.

In its latest weekly review publication, the Zimbabwe Coalition of Debt and Development (Zimcodd) said taxation of the informal sector would enhance resource mobilisation.

“Although there is debate surrounding the exact statistics that the Zimbabwean informal economy accounts for, what is certain is that the informal economy is over 60%,” Zimcodd said.

“In 2016, it was alleged that the informal sector had 5,7 million actors, a figure which might have greatly increased. A trend analysis of the history of Zimbabwe shows that the Zimbabwean informal economy has always been active even prior-independence. The informal sector is governed by a myriad of tax regimes that militates against optimum growth of the same.”

Some of the tax regimes affecting the informal sector include the 2% money transfer tax, the 30% withholding tax, informal traders 10% of rental cross-border traders and 10% of the value for duty purposes, among others.

In 2018, government announced plans to tax the informal sector, but it was rejected by stakeholders who cited unfair taxation burden.

“For Zimbabwe to attain an upper-middle class economy by 2030 there is a need for the government to consider taxing the informal economy in a just, inclusive and progressive manner in its soon-to-be-developed ‘formalisation strategy’,” Zimcodd said.

“The ‘formalisation strategy’ should prioritise embracing the informal economy as the new normal and rationalise informal economy tax regimes to ensure that they become progressive, inclusive and just.”

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However, Zimbabwe Informal Sectors Organisation executive director Promise Mkwananzi said the environment that the informal traders were operating under was not conducive for taxation.

“How can a government demand tax from the informal sector which it has neglected? They have provided nothing, but baton sticks and sjamboks to the informal traders, so where would the tax money come from,” he said.

“There is a need for a clear legislative framework and other mechanisms which govern the operations of informal traders for the taxation to work.”