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Cash-Strapped Govt Steps Up Moves to Tax Informal Traders

The cash-strapped government has stepped up efforts to tax the informal sector as it tries to inject cash into the fiscus.

Zimbabwe Revenue Authority commissioner general Gershem Pasi says his agency has already engaged the ministries of indigenization and local government to implement the proposal.

Speaking at the National Business Council of Zimbabwe, Pasi said the government will regularise the informal sector so the national fiscus can also benefit.

The government estimates that at least $7 billion is circulating in the informal sector. A 2012 study by Finscope said about 5.7 million people are working in the informal sector. The World Bank, the Small and Medium Enterprises Ministry and the Zimbabwe Multi Donor Trust Fund all worked together in the Finscope research.

The study revealed that 46 percent of the adult population – that is 18 years and older - in Zimbabwe are in the informal sector. Mashonaland East province has the highest proportion of the informal sector.

A report by the Confederation of Zimbabwe Industries says most companies are currently operating at under 40 percent of their capacity. Foreign direct investment has also dried up resulting in many people turning to the informal sector as companies down size.

Former Finance Minister Tendai Biti has previously criticized the government for focusing too much on the informal sector without working to revive collapsing companies.

Resource Exploitation Watch economist, Washington Mehlomakulu said the move to tax the informal sector is long overdue.
Commenting on the same issue, Labour and Economic Development chief economist, Prosper Chitambara, said the government must invest in the sector first before seeking taxes.