The Sunday Mail
Livingstone Marufu
AS Government explores options to broaden the tax base, the SMEs amd Co-operatives Development Ministry has requested a resource envelope of US$32 million from Treasury to formalise unregistered and non-compliant small businesses. The Zimbabwe Revenue Authority has been able to augment revenue collections from the formal sector through rolling out its fiscalisation project, in which businesses have to use fiscal tax registers that capture financial information and relays it in real time to tax authorities.
However, SMEs have not been subject to this and their is a growing push to ensure informal businesses start contributing to tax revenues.
SMEs Minister Sithembiso Nyoni said Government wanted to establish a comprehensive database of such businesses.
“The ministry has done a study to see what’s needed to formalise the informal sector so that they can positively contribute to the country’s fiscus. 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.
“Given the challenges we encountered in formalising the sector, we are now roping in other ministries and stakeholders to buy-in the systematisation process of the SMEs sector. Our ministry needs assistance in marketing, linkages and registration of companies in order to increase the tax base as there will be a systematic way of collecting taxes as many firms will be formally registered.
“We have proposed a total of US$32 million to make sure we provide shelter for our informal businesses, finance them and register all other vendors which are not in various associations. We are well aware that SMEs sector is already helping our economy in a big way but all we need is a holistic approach in order for the informal sector to contribute to the country’s fiscalisation,” said Minister Nyoni.
Government introduced presumptive tax in 2002 to help improve collections from the growing number of 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 those persons engaged in business not registered for tax purposes, such as commuter omnibuses, hair salons, small-scale miners and cottage industries. There are, however, many such businesses that continue to operate outside the tax framework.
Last week, Zimra board chair Mrs Willia Bonyongwe said the initial success of fiscalisation in informal businesses emboldened Government to widen its net to categories that are either paying Value Added Tax through manual returns or are non-compliant. As you are aware, fiscalisation is the recording of transactions for Value Added Tax purposes using electronic fiscal gadgets. The fiscalised gadgets record the information on read only memory, meaning that once recorded, this information cannot be altered.
“In the 2016 Mid-Term Fiscal Policy Review, the Minister of Finance and Economic Development extended fiscalisation to all VAT-registered operators with effect from 1 January 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 are now expected to be on fiscalisation with effect from 1 January 2017.
“Fiscalisation is intended to cover all clients (informal sector included) involved in sales transactions who have a fixed place of business. Extension to all clients is being done on a progressive approach. The Zimbabwe Revenue Authority has dedicated teams which identify and register new clients as part of the Authority’s strategies to broaden the tax base,” said Mrs Bonyongwe.
Zimra and other Government agencies are inviting non-compliant businesses to voluntarily register for tax purposes. The taxman also hopes that the whistleblowers’ initiative will help enforce compliance. Through the facility, whistleblowers are entitled to receive 10 percent of recovered amounts.
Zimbabwe National Chamber of Commerce president Mr Davison Norupiri said there was need to formalise SMEs as a matter of urgency.
“Zimra is too rigid. Its mandate should be extended beyond collection and penalising, it should contribute to the development process of the SMEs rather than portray the image of a monster. Zimra should not charge and penalise SMEs who are formalising in retrospect as other businesses will not see the benefits of formalisation. There is need for the provision of formal markets for SMEs so that they become taxable, as is the case for tobacco. Companies procuring from SMEs can demand tax clearance certificates, bank details, invoices and receipts to encourage them to formalise,” he said.
He also said Government should allocate public procurement quotas to SMEs to improve their viability.
