Zimbabwe Aims to Harness Informal Economy with Bold Taxing Strategy

Innocent Sibonginkosi Ncube

In a move to tap into the country’s vast informal sector, Zimbabwe’s Finance Minister Professor Mthuli Ncube has announced a new tax plan targeting small businesses operating outside the formal economy.

The 2025 National Budget aims to formalize the sector, boosting government revenue and promoting economic growth.

Informal Sector Dominates Economy

Zimbabwe’s informal sector accounts for over 60% of the country’s Gross Domestic Product (GDP), according to estimates. Despite its significant contribution, the sector operates largely off the books, denying the government vital revenue.

The 2018 International Monetary Fund (IMF) study “Shadow Economies Around the World” highlighted Zimbabwe’s large informal economy.

New Tax Measures

The proposed tax system will target specific sectors, including:

1. Fabric merchandisers (12% monthly rental)
2. Clothing merchandisers and boutiques (12% monthly rental)
3. Spare parts dealers (US$9,000 quarterly)
4. Car dealers (US$15,000 quarterly)
5. Grocery and kitchenware merchandisers (US$9,000 quarterly)
6. Hardware operators (US$15,000 quarterly)
7. Lodges (US$5,000 quarterly)

Businesses will be required to register with the Zimbabwe Revenue Authority (ZIMRA), maintain records of transactions, and transact through point-of-sale machines.

Industry Experts Welcome Move

Confederation of Zimbabwe Retailers president Denford Mutashu praised the budget as “a balanced approach to addressing critical economic and environmental challenges.”

Harare entrepreneur Taurai Tafirei of CET Computers said,

“Taxation equity and formalization of MSMEs are key for the economy to realize its full potential.”

Challenges Ahead

Experts caution that the success of the new tax measures depends on effective enforcement and addressing corruption. The previous presumptive tax system faced challenges, including poor enforcement and lack of fiscalization.

Government’s Goals

The new tax strategy aims to:

1. Boost government revenue
2. Promote economic growth
3. Enhance financial inclusion through point-of-sale machines and bank accounts
4. Support infrastructure development

As Zimbabwe seeks to formalize its informal sector, the success of this initiative will be closely watched.

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