Informal sector tax counterproductive, Zimbabwe warned

via Informal sector tax counterproductive, Zimbabwe warned | The Source  April 23, 2014

Zimbabwe’s government should extend technical support to its informal sector and not tax it to shore up its bare coffers as this will effectively destroy it, Indian ambassador Jeitendra Tripathi said on Wednesday.

India has one of the largest informal sectors in the world, making up half the economy and accounting for 90 percent of the country’s workforce. The country has, over the past three decades, been working to formalise the sector.

The Zimbabwe Revenue Authority (Zimra) is considering taxing Zimbabwe’s informal sector, which is estimated to constitute 85 percent of the economy, employing 60 percent of the country’s adult population, as the government desperately seeks to enhance its revenue.

Zimbabwe is battling a worsening cash crunch and relies almost entirely on tax collections, due to limited access to donor funds and external loans after falling out with the West over perceived rights abuses by President Robert Mugabe and Harare’s inability to service its debt to multilateral lenders.

But Tripathi, whose country’s economy is among those anchored by informal small to medium-scale enterprises (SMEs), said introducing taxes on small businesses would destroy their viability.

“It’s like killing the goose before it lays the eggs,” he told a business conference at the Zimbabwe International Trade Fair.

India has the second largest number of SMES in the world behind China.  Instead of taxing them, government must sponsor their activities to boost production, Tripathi said.

“Almost 90 percent of research to improve small business is taken care of by government (in India) and this is what you must do.”

His country is working with Zimbabwe to promote the sector, adding that the partnership will soon set up an incubation centre to offer local SMES support in the form of machinery.

 

COMMENTS

WORDPRESS: 11
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    The government supporting and growing business? Just check the last 34 years, you must be kidding.

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    Even playing field 8 years ago

    Agreed, no need to tax them BUT…. They are smuggling across the borders and not paying vat nor duties , the country is losing millions to this, stop the corruption at the borders, then the formal businesses whom pay taxes can compete. ZIMRA vat section also corrupt, there are obvious companies not charging vat, Chinese companies are even giving cash invoices written mainly in chinese and ZIMRA do nothing about it even when you show them the company and the proof….. They just get back handers and walk away. These are the things that are killing Zimbabwe. ZIMRA the corrupt ones, do you job for what you are paid, and stop lining your pockets, killing our Country.

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      John Thomas 8 years ago

      Open the boarders and allow free trade. Nobody has a duty to support your inefficient business

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    WHAT A JOKE ,THEY HAVE ALREADY KILLED THE GOOSE THAT LAYED THE GOLDEN EGG!FIRST THE FARMS,THEN THE MINES ,NOW THE INDUSTRY.AND LAST BUT NOT LEAST THEY WILL COME FOR YOUR RESIDENTIAL PROPERTY.THEY ARE ALL THIEVES.

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    Mseyamwa 8 years ago

    So who should pay taxes. The civil servants with greatly reduced salaries are paying taxes along with all other workers in the formal sector whose remuneration is not commensurate with their workload, but they pay taxes. Taxes to ensure even the informal traders have infrastructure like roads, hospitals and children’s schools. Where would the fairness be upon citizens? Aren’t governments supposed to treat all as equal?

    The misgovernance of government funds is now forcing citizens to segregate among themselves yet they know the enemy is not among them. If government collects taxes, let it collect from all equitably and if it chooses notbto, then let there be no selection among citizens. Is any of us entitled to free rides on others’ sweat?

    Those taxed are forced to sponsor a single party’s youth as some of that tax ends up as loans to supporters, who become informal traders and don’t want to pay back the loans and don’t want to pay taxes. Who is whose donkey?

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    Little Dorrit 8 years ago

    Drastically reduce or entirely remove personal, company, value added and capital gains tax; remove all duty and import taxes- sur gargle every litre of fuel sold – simplify and reduce cost of collection; widen the tax net to capture Chipangano and all other informal traders who do not make any contribution to the economy. The goose that lays the egg is the Formal sector and is being fried alive by ZIMRA bureaucracy and a plethora of levys and taxes

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      Correct little d. But they are closing their doors one by one! Corruption and greed are ZPF’s middle names and they are reaping what they have sown. Stand strong in the day of the Lord’s battle.

    • comment-avatar
      John Thomas 8 years ago

      Spot on

  • comment-avatar
    Little Dorrit 8 years ago

    Sorry – should read “surcharge”!

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    Saddened 8 years ago

    Good luck to anyone, especially the incompetent Zimra, in trying to collect taxes from the informal sector. Please let us know how you intend doing this so we can have a good laugh.

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    jobolinko 8 years ago

    shame