Zimbabwe to Bring Informal Sector into Formal Economy.
Zimbabwe's Minister of Finance, Prof. Mthuli Ncube, plans to integrate large parts of the informal sector into the formal economy. He proposed legal changes during the 2025 Budget presentation last year, which Parliament and President Mnangagwa approved in the Finance Act.
New tax rules require many informal businesses to register with the government. If they do not, they will have to pay very high taxes. The government also introduced measures to reduce smuggling. Certain goods commonly sold by informal traders are assumed to be smuggled. Traders must show paperwork to prove the goods were obtained legally.
The Minister said a program would soon be implemented to make informal traders comply with the rules. They will need to:
Existing taxpayers and formal retailers have pushed for these changes. They want informal businesses to pay their share of taxes. Formal retailers say it is unfair when informal shops avoid duties, taxes, licenses, and wages required by law.
The government agrees with these concerns. It wants the extra tax revenue to pay for services and infrastructure. Informal businesses benefit from government spending without contributing. Many see them as "freeloaders."
As Zimbabwe aims to reach upper-middle income status by 2030, ensuring all businesses operate formally will be a priority. The government does not want to eliminate small informal enterprises. But it insists they must follow basic rules, as small businesses do in developed countries.
The tax revenue from the informal sector, while small per business, could add up to a large sum. This is especially important as some foreign health funding may be reduced sooner than expected. The extra money could help fill gaps in health and education budgets.
To encourage compliance, some of the new informal sector taxes could be designated for services that informal business owners use. Upgrading small business support programs is another option. But steep presumptive taxes in the new law also serve as a warning - register and pay, or face punitive charges that could force closure.
With the legal framework now in place, the government is finalizing practical steps to enforce the new rules across the informal sector.
Zimbabwe's Minister of Finance, Prof. Mthuli Ncube, plans to integrate large parts of the informal sector into the formal economy. He proposed legal changes during the 2025 Budget presentation last year, which Parliament and President Mnangagwa approved in the Finance Act.
New tax rules require many informal businesses to register with the government. If they do not, they will have to pay very high taxes. The government also introduced measures to reduce smuggling. Certain goods commonly sold by informal traders are assumed to be smuggled. Traders must show paperwork to prove the goods were obtained legally.
The Minister said a program would soon be implemented to make informal traders comply with the rules. They will need to:
- Register for tax
- Get licenses from local authorities
- Follow labor laws
- Collect taxes from employees' wages
- Pay into the national social security system
- Have documents ready to prove goods are not smuggled
Existing taxpayers and formal retailers have pushed for these changes. They want informal businesses to pay their share of taxes. Formal retailers say it is unfair when informal shops avoid duties, taxes, licenses, and wages required by law.
The government agrees with these concerns. It wants the extra tax revenue to pay for services and infrastructure. Informal businesses benefit from government spending without contributing. Many see them as "freeloaders."
As Zimbabwe aims to reach upper-middle income status by 2030, ensuring all businesses operate formally will be a priority. The government does not want to eliminate small informal enterprises. But it insists they must follow basic rules, as small businesses do in developed countries.
The tax revenue from the informal sector, while small per business, could add up to a large sum. This is especially important as some foreign health funding may be reduced sooner than expected. The extra money could help fill gaps in health and education budgets.
To encourage compliance, some of the new informal sector taxes could be designated for services that informal business owners use. Upgrading small business support programs is another option. But steep presumptive taxes in the new law also serve as a warning - register and pay, or face punitive charges that could force closure.
With the legal framework now in place, the government is finalizing practical steps to enforce the new rules across the informal sector.
