As the nation starts getting back to business, we are confronted with the gazetting of tax proposals as contained in the national budget that was hastily passed by Parliament in December 2023.
These measures, as we previously stated in our response are an attack on the ordinary Zimbabwean’s pursuit of survival, and seem designed to obliterate the informal economy where many have sought refuge.
All this on the back of one of the most miserable festive seasons ever witnessed in the country!
Today, Wednesday the 3rd of January 2024, the Zimbabwe Revenue Authority (Zimra) published a notice on what they termed ‘Measures to Protect Value Chain Integrity and Transparency and to Counter Unfair Competition by Informal Traders’.
The measures introduced ostensibly to 'protect value chain integrity and transparency and to counter unfair competition by informal traders' are in reality an attack on the lives of the ordinary consumer and small business trader.
It is our view as Viset that these measures are likely to produce the following;
- Negatively affect the wholesalers as informal traders, who are cash paying customers will be turned away.
- Overwhelming of the Zimra system as they have no demonstrable ability to cope with the large number of applicants.
- Logistical nightmare for wholesalers and increased workload.
- Disruptions in the value chain, as shortages will inevitably arise as the regulations kick in.
- Informal traders may be forced to prioritize imported goods, as these will tend to be easier to procure, thereby hurting wholesalers and manufacturers.
The above effects are in no way exhaustive, but clearly illustrate just how negatively the instrument will affect business and the lives of the ordinary citizen.
As an informal economy organisation, we believe this is a wrong turn in the bid to formalise the informal sector, as it feeds into fears that all government is interested in is taxing the sector with no accruing benefits for traders.
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The only way to make retailers competitive is through fixing the exchange rate policy that sees retailers pricing goods at ridiculous prices due to the disparity between the official exchange rate and the street rate.
As of January the 1st 2024, meat products are now attracting 15 percent Value Added Tax (VAT), whilst on the other hand, catastrophically, wholesalers are now demanding, as instructed in the budget, that any individual or business wishing to purchase goods worth more than US$1000, (or the equivalent in ZWL), within a 30 day period, is required to be a tax registered operator with the Zimbabwe Revenue Authority (Zimra).
This stipulation flies in the face of the formalisation strategy as led by the Ministry of Labor and Social Welfare, as well as provisions in the National Development Strategy 1 (NDS1), the government’s economic blueprint.
This tax regime is highly incongruent with President Emmerson Mnangagwa's war-cry “leaving no one behind”.
Estimates note that up to 90% of Zimbabwe’s workforce is employed in the informal sector.
The informal sector pushes volumes of goods produced in Zimbabwe. Small scale agriculture supplies more tobacco and maize, for example, than large scale farms.
Hypothetically, Finance minister Mthuli Ncube’s tax regime means a small holder farmer or merchant cannot buy goods or get services of US$1000 without a tax certificate.
Is that not absurd since US$1000 can only get 20 bags pf top dressing fertiliser which sells at US$ 50/bag?
All sectors including mining, tourism and manufacturing will be hit hard.
The government needs to be reminded that as we shared in the formalisation consultative meetings, for us informal economy actors, the process is not to just aid the extraction of the meagre incomes being derived from the sector, but that the government of the day must first of all invest in initiatives such as social protection and appropriate workplace infrastructure, before they look to milk from a sector that has ensured that there is an economy and a citizenry to talk about following the flight of Multinational Corporations, and the hunger of 2007-2008.
Vendors Initiative for Social and Economic Transformation (VISET) is very clear on the way forward.
Government has to suspend the levying of VAT on commodities such as meat and other basics in the general food basket as this will push products beyond the reach of consumers, and indirectly cause health challenges of stunted growth and malnutrition is especially in urban based children.
Secondly, there is also need for a reconsideration of the stipulation that individuals or entities be tax registered in order to purchase from wholesalers, as we believe this is designed to punish informal traders who are a critical component in the industrial value chain as they bring the product closer to the consumer.
Informal traders are now part of the distribution system as they bring products close to the consumer.
These operators have ensured that many families can have meals in these challenging times through the extension of credit facilities.
Thirdly, besides, the foregoing, Zimra is in no way ready to register all these informal traders for tax purposes if were to go by their turnaround time of processing renewal of annual tax certificates for organizations.
Fourthly, contrary to government perception, there are no billions of profits being generated by the informal economy worker, but that it's a daily battle of survival.
The government is rather advised to redirect attention to the mining sector, where millions of profits are being made and siphoned out of the country through smuggling and other illicit methods.
We surely find it hard to believe how the government is ready to tax ordinary people to death, whilst giving tax holidays to billion dollar companies that are excavating and exhuming our mineral wealth on a daily basis with scant regard to our environment?
Whose interest is Prof Mthuli serving- Zimbabwe or big foreign corporates?
Ncube, as head of Finance, Economic Development and Investment Promotion, author of these measures, we would like to remind him and indeed our government, and parliamentarians that you cannot do horse-trading with people's lives, where inducements such as duty-free vehicles were given in order to pass the anti-people 2024 budget.
How many ordinary workers including civil servants afford these duty free cars? Do people eat cars every day?
The idea to protect inefficient and top heavy wholesalers and retailers is a non-starter.
Large corporates must adjust and reform, lower their operational costs and use their scale and access to capital to compete.
The market forces must determine who survives- not the Minister’s proverbial unfair tax-hand.
As per the April 18 1980 promise: Zimbabwean tax regime must support local production and enterprise, and not punish it.
A nation is judged by how it treats its most vulnerable in society!
*Wadzai is an informal economy expert and Vendors Initiative for Social and Economic Transformation (Viset) executive director
These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Private) Limited, past president of the Zimbabwe Economics Society and past president of the Chartered Governance and Accountancy in Zimbabwe. Email - kadenge.zes@gmail.com and Mobile No. +263 772 382 852
