THE Confederation of Zimbabwe Retailers (CZR) has proposed a general and annualised presumptive tax of US$4 000 for emerging wholesale and retail players to enforce compliance.
In a 10-page document titled: ‘CZR Policy Brief on Formalisation of the Retail and Wholesale Industry in Zimbabwe’, the lobby said tax evasion was rife in the wholesale and retail sector, depriving government of revenue.
It said most emerging businesses were evading taxes, placing an unfair burden on formal players.
CZR came up with a formalisation strategy to address the issue.
The strategy involves simplification of registration process, full support of emerging players, mandatory membership to retail and wholesale business membership organisations, enhancement of border controls to address smuggling, enhancing transit checks and post clearance audits.
It also includes the development of a supportive regulatory framework, facilitation of access to finance and establishment of decentralised business support centres.
“Authorities should consider the possibility of charging a general and annualised presumptive tax for emerging wholesale and retail players and then link the compliance with benefits and incentives for informal business to register and become part of the economy,” the paper reads.
“Emerging traders are suggesting that instead of continuing paying kickbacks to rogue officials, it is progressive if they officially pay directly to government and local authorities and suggestions are an annual figure averaging US$4 000 per annum.”
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CZR said there is a need to make presumptive tax simple in order to reduce the burden of compliance for small businesses.
It said businesses can be offered incentives in different forms like legal recognition and access to credit.
“Informal businesses often face high compliance costs associated with record-keeping, accounting and tax administration. Presumptive taxes typically have lower compliance costs as they rely on simple and easily measurable parameters,” CZR said.
“This reduced cost can motivate informal businesses to transition to the formal sector.
“The call by CZR for a presumptive tax model is also informed by realities of the struggle faced by formal business in the country to comply with current tax legislation without the business facing serious viability challenges.”
CZR urged the government to rethink its tax laws with a view of refining where there was need. It said a high tax regime can be linked to evasion and growth of a shadow economy which defeats the development agenda.
“Expansion of the tax base and a simplified tax system can increase fiscal revenue with minimum enforcement. A digitalised tax system for that matter eliminates corruption,” CZR said.
In November 2021, the government began consultations towards formulating a comprehensive small-to-medium enterprises (SMEs) formalisation strategy.
The Women Affairs, Community, Small and Medium Enterprises Development ministry is coordinating the strategy.
Zimbabwe’s informal sector has been expanding ahead of a formal sector that has been crippled by de-industrialisation.
The International Monetary Fund estimates that about 60% of the economy was now controlled by the informal sector. Billions in potential taxes are locked up in the informal sector, and authorities have been exploring ways of drafting these businesses into the formal sector.
In 2022, a total of 2 750 small to medium enterprises (SMEs) were facilitated to access markets and 1 325 were linked with sectors, such as manufacturing, agriculture, textile and to unlock opportunities.
The wholesale and retail sector contributes nearly 20% to Zimbabwe’s gross domestic product, according to official figures. Growth of the sector over the past few years has been under threat, with this year’s sectoral growth projected at 1,6%.
