The SMEs and Co-operatives Development Ministry needs US$40 million to formalise unregistered and non-compliant small businesses so as to widen the national tax base.
This comes as Government encourages small businesses to create synergies with manufacturers across the country for easier taxation processes.
The Zimbabwe Revenue Authority has boosted revenue collections from the formal sector through a fiscalisation project in which businesses use fiscal tax registers that capture financial information and relay it in real time to tax authorities.
However, SMEs have largely remained outside this dragnet and there is a growing push to ensure all businesses start paying tax.
According to Zimra, 19 414 SMEs had registered with the revenue collector by the end of October, compared to 14 000 in June.
Available figures show that at June 30, 2017, just 5 080 of these had installed fiscal tax registers.
SMEs Minister Sithembiso Nyoni told The Sunday Mail Business last week that Government had conducted a study to see what was needed to formalise the informal sector.
“We now have a fully-compiled report that awaits Cabinet approval, which will make sure that most of the informal businesses are formalised,” she said.
“We are moving towards identifying at least 1 000 serious manufacturers to do a direct linkage in every province to increase production in this sector. The country’s production mantra is the way to go and SMEs sector should take the lead in this new matrix.
“We have started linkages between SMEs with some producers as we move to produce more goods. Already in Bulawayo we have the system that has started yielding results but soon we shall have manufacturers and vendors meeting to strengthen our bid.
“We require a total of US$40 million to achieve these linkages with each province expecting to get not less than US$4 million for the programme.”
The requested US$40 million will provide shelter for informal businesses, finance them and register vendors who do not belong to any recognised groupings.
Government introduced a presumptive tax in 2002 to improve collections from informal businesses. The Income Tax Act provides for levying of a presumptive tax on all informal traders.
This tax head is made up of presumed income of businesses not registered for tax purposes, and these include commuter omnibuses, hair salons, small-scale miners and cottage industries.
Last month, Zimra board chair Mrs Willia Bonyongwe said initial successes in fiscalisation of informal businesses emboldened Government to widen the net to categories that are either paying value added tax through manual returns, or are non-compliant.
Fiscal registers record the information on “read only” memory, meaning that once captured it cannot be altered. In 2016, the Finance and Economic Development Ministry extended fiscalisation to all VAT-registered operators with effect from January 1, 2017. This means that in addition to VAT Category C registered operators — who were required to fiscalise in terms of the Value Added Tax (Fiscalised Recording of Taxable Transactions) Regulations, 2010 which came into effect on 1 July 2010 – VAT categories A, B and D should be fiscalised by now.
Taxation of SMEs has given a fillip to Treasury, with Zimra’s 2017 third quarter report showing they accounted for 25 percent of collections from businesses.
However, SMEs have been hit hard by foreign currency shortages, and Minister Nyoni recently said: “I have been getting calls to say, minister, we were importing parts for our vehicle maintenance and now we can’t. I am very confident that the Governor of the Reserve Bank is working on it.”
Big companies benefit from foreign currency allocations from the central bank.
Minister Nyoni also said: “We are really calling upon Zimbabweans to bank the money because as we have seen, even in the media, a lot of money is out there. Just bank so that people can use it.
“This is a result of a lot of (several) factors and one of them is that instead of banking we are now recycling the money outside the formal banking system.”
10,701 total views, no views today