Staff Reporter
Business strategists are advocating the use of the carrot and stick approach to harness resources from the informal sector, which has become one of the leading businesses in Zimbabwe, the Zimstat report of 2022 says.
Presenting at a business meeting in Harare, Bronson Mutanda and Admire Mthombeni highlighted that the informal sector could be used to pool resources for entrepreneurial activities so as to attain Vision 2030.
“The informal sector in Zimbabwe is in fact a pool of entrepreneurial activity that can be used for mobilising resources to be channelled for socio-economic development. For the country to achieve its 2030 agenda of becoming a middle-income economy, policymakers need to consider the informal sector as an untapped reservoir from which financial resources can be harnessed. It would take well-planned initiatives to harness domestic financial resources from this sector,” stated the duo.
The duo advised policymakers to adopt multiple strategies to boost domestic tax collection.
“Policymakers need to adopt multiple strategies for boosting domestic tax collection as a way of dealing with the fiscal deficit and achieving the 2030 agenda of becoming an upper middle-income economy. Small-scale businesses and the informal sector present a significant potential source of revenue considering that it constitutes a significant share of national income,” they stated.
The duo further stated that tax education in the informal sector needs to be introduced to enhance compliance in informal business. They indicated that by actively and persistently pursuing tax education, the informal sector was likely to be induced to voluntarily comply over time.
Meanwhile, according to the National Development Strategy (NDS) 1 (2020), fiscal sustainability is facing threats arising from weakening revenue collections, which gradually declined from an average of 18% of gross domestic product (GDP) in 2015 to 13% by 2020.
This is ascribed to a number of factors, including the economy`s expanding informality, the quantity and value of fiscal incentives, the imposition of government fees below the cost of collection, leakages that take the form of smuggling, the underreporting of income, particularly in relation to transactions in United States (US) dollars, and corruption.
