THE Zimbabwe Revenue Authority (Zimra)’s drive to increase domestic revenue through tax to fund the country’s development remains mired by lack of tax compliance by the country’s buoyant informal sector.
Millions of dollars in potential tax are stuck in the informal trade which is estimated to be contributing 60 percent of the country’s GDP.
While speaking at the Financial Gazette Annual Tax Review Forum, Zimbabwe Revenue Authority (Zimra) commissioner-general Faith Mazani said while there are challenges in tapping into the revenues from the sector, the taxman is also discovering some big businesses informalising their operations.
“The main challenges in taxing the informal sector are mainly faced with the income earned from business transactions.
“The challenges we have faced include a complex tax system requiring the keeping of books and records.
“No sense of obligation and a quid pro quo stance from the informal sector — ‘Is there any benefit I derive from paying tax?’” Negative perception of taxation by the informal sector players.
“And when we define informal sector, we usually say small business but as indicated, there are other big businesses — indigenous or otherwise which have also become informal,” Mazani said.
The informal traders, who include the cross-border traders, the vendor on the streets, the owner of a flea market, the butchery owner, the hair dresser, the home-based tailor and the kombi owner, among others are expected to pay presumptive tax.
For example, cross-border traders who import commercial goods into Zimbabwe are required to pay a presumptive tax equal to 10 percent of the value for duty purposes (VDP) of the commercial goods.
However, as Zimbabwe’s tax compliance remains low, government also struggles to carry out development activities causing it to rely on donor funds to respond to social needs.
“Zimra continues to encourage voluntary compliance and with the use of taxpayer education we are trying to ensure that there is a better understanding of the importance of paying taxes.
“Zimra encourages registration of informal sector players through a partnership with the ministry of SMEs to have BP numbers registered enabling them to participate in the public procurement system that requires suppliers to be tax compliant,” Mazani added.