The Sunday Mail
The Zimbabwe Revenue Authority (ZIMRA) will soon begin implementing measures that will witness the tax-man tapping into the lucrative micro, small and medium enterprises sector.
Zimra told The Sunday Mail Extra recently that the revenue collectors, along with relevant line ministries, have agreed on a raft of policy measures whose implementation was imminent.
The intense agitation for the immediate taxation of the rapidly growing sector comes against the background of the 2012 Finscope (MSMEs) survey which revealed that 65 percent of the MSME sector generated close to US$7,4 billion in 2012.
The move is, however, likely to face stiff resistance from small business owners who argue that they are barely making ends meet.
The Finscope survey also noted that 40 percent of such enterprises rake in not more than US$200 a month.
Interestingly, the report also indicated that the sector was a source of 5,7 million jobs in a country where the formal sector employs no fewer than two million people.
Zimra says it is finalising extensive consultations with the Ministry of Small to Medium Enterprises and Co-operative Development, and the Ministry of Local Government, Public Works and National Housing to come up with sustainable solutions on how to capture the small and medium enterprises sector.
“We are working together with relevant stakeholders and regulatory authorities to find a lasting solution to formalisation of the informal sector,” said ZIMRA in a response to the questions from The Sunday Mail Extra.
“The overall strategy of ZIMRA in bringing in the informal sector into the tax net is education of some of the taxpayers who may not be fully appreciating their legal obligations.
“Over the years, such educational programmes have been carried out and these come in various forms such as through targeted groups or general engagement”.
The revenue authority says they have presumptive taxes under domestic taxes which are final taxes making them simplified for the targeted sectors to comply with.
“We have a Simplified Trade Regime also targeted at small traders so that they do not get subjected to the rigorous processes associated with the normal commercial importation of goods and services.
“In addition to this, informal trading is “informal,’’ as the expression sounds, so for sustainable contribution to the fiscus by these growing businesses, there is need for them to have proper accounting systems”.
However, ZIMRA said what has made its task difficult is the fact that 85 percent of the MSMEs are unregistered while only 14 percent of business owners are banked.
Experts spoken to by The Sunday Mail Extra had mixed sentiments with economist Mr Peter Rwafa arguing that introducing taxes on small businesses would destroy their viability and was like killing the goose before it lays the eggs.
“The country should instead extend technical support to the small and medium enterprises sector as heavy taxation will result in the suffocation and subsequent extermination of this emerging economic hub,” he said.
What is needed is the simplification of the compliance and registration systems so that this becomes less burdensome to the new taxpayers.
Mr Rwafa argued that the current regime makes it more difficult to attract new taxpayers to the basket if not properly instituted.
ZIMRA relies mostly on cash from taxation to finance most of Government activities and the coming on board of the informal sector is widely expected to broaden the coffers of the country’s revenue collection base.
Economist Mr Brains Muchemwa alluded to the fact that the economy was getting informal; hence there was need for stakeholders to come up with measures that brings a win-win situation to all involved.
“Yes, it is true that the economy is getting informal considering widespread bankruptcy among the big corporates of yesteryear,’’ he said.
“The thinking that the informal sector is slowly taking up and filling the big shoes of big corporates is duly correct when it comes to providing goods and services, but the same cannot be said about the informal sector tax contributions to the fiscus”.
He said as a result the country was losing a lot of revenue.
China and India have the largest number of SMES in the world, with the sector accounting for 40 percent of the latter’s workforce.
In India, the government is actively involved in the running and does a lot in sponsoring sector activities to boost production
