MUTARE - Zimbabwe's high tax regime is spooking the $7,4 billion informal sector from formalising their businesses, shutting out government from accessing up to 5,7 million small-to-medium scale enterprises (SME).
This was said by consulting economist Gift Mugano on Tuesday at an SME formalisation strategy consultative meeting at a local hotel.
Mugano said, currently, government was getting less than two percent of the SME sector’s revenue.
The economist noted that with a bigger pool of business activities, “the cost of tax can be lower.”
He said there must be a push for the alignment of legislative instruments that affect SMEs.
“We are streamlining everything,” Mugano said.
“Formalisation must, however, bring value to everyone and everyone should even feel guilty if they fail to pay their taxes because they will be deriving direct benefits from doing so.
“It’s supposed to be a two-way process.”
Mugano said SMEs’ failure to formalise is also preventing them from growing their businesses because they continue to suffer from financial exclusion, lack traceability, and remain unorganised.
“The challenge is you cannot grow the economy when you have more than 2,8 million working in the home,” he opined.
He said if organised, SMEs have the potential to replace a significant volume of imports.”
“We can localise money circulation,” he said.
With 60 percent of SMEs in the agricultural sector, Mugano said food imports by chain supermarkets could easily be offset.
SMEs that participated in the exercise were generally agreed on the need to formalise their business ventures.