Zim has sec­ond largest in­for­mal econ­omy

The Sunday Mail (Zimbabwe) - - BUSINESS - Tawanda Musarurwa

EX­PERTS say in­no­va­tive mea­sures and poli­cies are crit­i­cal in get­ting the best out of Zim­babwe’s grow­ing in­for­mal econ­omy.

Lat­est In­ter­na­tional Mone­tary Fund (IMF) fig­ures show that Zim­babwe has the sec­ond largest in­for­mal econ­omy as a per­cent­age of its to­tal econ­omy in the world at 60, 6 per­cent.

Ac­cord­ing to an IMF work­ing pa­per ti­tled “Shadow economies around the world: What did we learn over the last 20 years?” the lead­ing coun­try in this re­spect is Bo­livia at 62, 3 per­cent.

Ba­si­cally, the in­for­mal econ­omy (known by dif­fer­ent names such as the shadow or hid­den econ­omy), in­cludes all eco­nomic ac­tiv­i­ties which are con­cealed from of­fi­cial au­thor­i­ties for mone­tary, reg­u­la­tory, and in­sti­tu­tional rea­sons. But this is not nec­es­sar­ily a bad thing, ac­cord­ing to some in­ter­na­tional econ­o­mists.

An­a­lysts at Akri­bos Re­search Ser­vices say the in­for­mal sec­tor can also drive con­sump­tion of lo­cal prod­ucts.

But the main dis­ad­van­tage is that it lim­its gov­ern­ments’ rev­enue col­lec­tions given that in­for­mal busi­nesses do not pay di­rect taxes and other so­cial se­cu­rity con­tri­bu­tions.

The growth of the in­for­mal sec­tor in Zim­babwe has largely been a re­sult of the lim­ited lev­els of for­mal em­ploy­ment. In this re­spect, those with­out salaried jobs typ­i­cally en­gages in small busi­nesses in or­der to gen­er­ate steady streams of in­come.

Ac­cord­ing to an­a­lysts, in or­der to ac­crue ben­e­fits from the in­for­mal sec­tor, the Zim­bab­wean Govern­ment has come up with in­no­va­tive strate­gies. Th­ese in­clude the In­ter­me­di­ate Money Trans­fer Tax (or 2 per­cent tax) in­tro­duced by Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pro­fes­sor Mthuli Ncube ear­lier this month.

They also sug­gest the es­tab­lish­ment of a Na­tional Ven­ture Cap­i­tal Fund to ca­pac­i­tate SMEs and Road-side Busi­nesses (RSBs) in or­der to chan­nel them into the for­mal econ­omy.

Mean­while, the Zim­babwe Rev­enue Author­ity (Zimra) re­cently said it was mak­ing pre­sen­ta­tions to Trea­sury to re­view the tax struc­ture for small and mi­cro en­ter­prises. Zimra Com­mis­sioner-Gen­eral, Ms Faith Mazani said the rev­enue col­lec­tor’s work in progress in­cluded seg­ment­ing tax­pay­ers in re­la­tion to their ca­pac­ity and busi­ness mod­els. Th­ese groups in­clude large client tax­pay­ers, medium client tax­pay­ers, small client tax­pay­ers and mi­cro tax­pay­ers. The seg­men­ta­tion will en­sure ef­fi­ciency in rev­enue ad­min­is­tra­tion.

Re­struc­tur­ing of the tax mod­els for small and mi­cro-busi­nesses could see the former pay­ing a turnover-based tax, while mi­cro-busi­nesses could pay a fixed amount.

A sup­port­ive tax sys­tem is one of the mea­sures that are cur­rently be­ing con­sid­ered by Govern­ment to co-opt SMEs into the main­stream econ­omy.

An­a­lysts ar­gue that it is also im­por­tant for the SME sec­tor to be prop­erly mea­sured in terms of its na­ture and size.

Base­line data helps in com­ing up with ef­fec­tive pol­icy frame­works. Ac­tion plans are only as good as their data foun­da­tions.

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