By Wisdom Mumera
Government says it is using its Rapid Results Initiative program to ensure that small to medium enterprise (SMEs) are regularized and paying tax.
According to the FinScope MSME Zimbabwe Survey 2012, there are about 3.5 million SMEs operating in various sectors of the economy and of that number only 15 percent are regularized.
The FinScope Survey adds that the 85 percent of SMEs are unwilling to regularize their ventures due to fear of being over-taxed by the Zimbabwe Revenue Authority (Zimra).
While lack of registration has prevented many SMEs from accessing resources that have been availed by treasury and it is also on the other hand said to be prejudicing government of potential revenue.
Unsubstantiated reports claim there is about US$7billion circulating in the informal sector and not reaching the formal channels at a time when government is failing to adequately finance its US$5.7 billion national budget.
Speaking at a Zimra and SMEs meeting, Permanent Secretary in the Ministry of Industry, Commerce and Enterprise Development Abigail Shonhiwa who was standing in for Minister Mike Bimha said there was too much informalisation in the economy which is depriving the country of revenue.
“The high level of informalisation in the country is too high and unsustainable for the economy and so under the Rapid Results program we aim to have more SME’s register with Zimra to contribute to the state coffers” she said.
Government has been trying for many years to formalize the informal sector hoping that it will collect tax from them to fund its insatiable bill of expenditures fronted by an unsustainable wage bill which gobbles about 85percent of the poorly performing revenue.
Under performing revenue has seen government failing to adequately finance various social service sectors such as health, education and social welfare among others.
Last year government issued a Value Added Tax (VAT) amnesty to allow SMEs to register with Zimra but only 12 992 complied.
Permanent Secretary Shonhiwa also revealed that the VAT amnesty is continuing this year up to June 30 to enable more SMEs to register.
In a bid to escape Zimra, most SMEs are operating from their backyards and selling their goods to people in their locality.
Speaking at the same occasion, Zimbabwe Chamber of SME’s chairperson Daniel Chinyemba blamed high tax brackets as the main reason preventing SMEs from formalization.
“It’s the rate of the taxation that has been the problem. The government, through Zimra, has been copying and pasting regulations from other countries, without paying attention to out particular context.
“The country is run by SME’s yet we don’t see the response from government in terms of facilitation for finances,” he said.