The Zimbabwe Revenue Authority (Zimra) is making representations to Treasury to review the tax structure for small and micro enterprises, the tax collector’s commissioner-general Faith Mazani said this week.
Within the Zimbabwean economic milieu, SMEs are typically defined as small or medium-sized business ventures in any sector of the economy.
These include small and medium companies, co-operatives, sole traders and the informal traders.
According to ZIMRA, the operations of SMEs may give rise to obligations for any or all of the following taxes: Presumptive Tax, Income Tax, Value Added Tax (VAT), Pay As You Earn (PAYE), Withholding Tax (WHT), among others.
This has resulted in numerous small businesses failing to meet their tax obligations.
However, Mazani said ZIMRA has work in progress to segment taxpayers in relation to their capacity and business models, which are large client taxpayers, medium client taxpayers, small client taxpayers and micro taxpayers so as to ensure efficiency in revenue administration.
Restructuring of the tax models for small and micro businesses could see the latter paying a turnover-based tax, while micro-businesses could be set to pay a fixed amounts.
But the commissioner-general admitted that the proposed tax restructuring for the lower segments will require an adjustment of the relevant tax laws.
ZIMRA is guided by several pieces of legislation, but critically by the Income Tax Act and the 2017 Finance Act (No.2).
“In terms of SMEs, we are segmenting out taxpayers. We recently established a large clients segment. We are also segmenting the small business and the micro-businesses.
The proposal that I am making to the Minister of Finance and Economic Development, which will require a change in law is that our normal taxes only apply to the medium and large companies.
“For the small businesses we have a ‘turnover tax’ . . . we just say what is your turnover and then we have a simplified tax system for the SMEs,” said Mazani.
“Then below the SMEs, we will also be looking at the micro-businesses, where for them, again with the turnover we are not looking at percentage, but we are now looking at, maybe now for a small business that makes $5 000 to $10 000 a year we can say they can pay a fixed amount with a certain range. These are some of the proposals that we are making.”
According to an International Monetary Fund (IMF) working paper titled “Shadow economies around the world: What did we learn over the last 20 years?” earlier this year Zimbabwe’s informal sector — at circa 60 percent of the economy — is the second-largest in the world after Bolivia.
A supportive tax system is one of the measures that are currently being considered by the Zimbabwean Government to co-opt SMEs into the mainstream economy.