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The government is coming down hard on the informal sector

Informal Market in Harare, prices

The informal sector was among the hardest hit when lockdown measures were at their tightest. Their businesses and services fell out of the bounds of what was deemed essential services so many of them couldn’t earn a living. Many struggled desperately to make ends meet during that time and returning back to work didn’t magically solve everything.

I can imagine it was like starting from scratch because any reserves would have been depleted by the time they lockdown restrictions were lifted. Now, what I thought would be the logical course of action would be leniency going into 2021.

But as we saw with what the Minister termed “Tax Relief” there is no joy here too.

Honourable Members would be aware that Government has implemented a presumptive tax structure on informal businesses that include micro and small enterprises, with a view to ensure that they contribute to the Fiscus.

A number of enterprises operate from designated business premises
where the landlords are either Local Authorities or private property
owners such as the Gulf Complex and Kwame Nkrumah Mall, among
others. Their place of business is, thus, comprised of partitioned units in
commercial buildings.

The fixed nature of business, thus, presents an opportunity for the tax administration to improve tax collections from presumptive taxes I, therefore, propose to introduce a presumptive tax of an equivalent of US$30 per unit per month In the case of Hairdressers, restaurants, bottle store operators and cottage industry, the following presumptive tax rates will apply:

Mthuli Ncube, Minister for Finance (National Budget Statement)
CategoryPresumptive Tax rate Per Month (ZWL$)
Hairdressers2 500 (approx. US$30.56)
Resteraunts and Bottle Stores10 000 (approx. US$122.25)
Cottage Industry10 000 (approx. US$122.25)
USD convertions were at the Auction Rate (1:81.8) published 24/11/2020

Property owners will be responsible for collecting remitting the tax. Failure to do so will result in the landlord being charged the equivalent of the total amount plus interest.

Where are they expecting people to get this money from?

On top of rentals and families to feed the government has decided to impose a tax on the informal sector which at this point is still recovering. This will most likely result in many traders no longer being able to afford the cost of operations and creep deeper into poverty.

I’ll admit I am an armchair economist but I doubt you’d argue that it doesn’t bode well for the economy if more people have less money to spend with little to no alternatives of earning a living.


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2 thoughts on “The government is coming down hard on the informal sector

  1. The 2% tax was meant to target the informal sector. Now they are targeting it again.

    Do landlords get paid to do administrate taxes? No! The tax man should do they job. It is hard enough trying to get tenants to pay their rent, now the landlord should chase after taxes.

    The tax man will be busy boasting that they met their quarterly targets, yet they aren’t don’t the work. Already, banks are collecting the 2% tax, whilst the tax man is sleeping.

    What happens if the money is lost/stolen in the hands of the landlord? It’s poorly thought out.

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