‘SMEs growth requires supportive tax framework’

THE drive to promote growth of informal businesses into big enterprises is critical to Zimbabwe’s economic transformation efforts and has to be supported by a friendly taxation and financing framework, members of the National Assembly have said.

A vibrant small to medium enterprise (SMEs) sector presents a solid base for job creation and inclusivity and diversification of the country’s economy, experts have said.

The need to capacitate the sector attracted intense debate in Parliament recently as legislators voiced concern on inherent bottlenecks that frustrate budding businesses.

Following the challenges facing big industries, Zimbabwe has one of the largest informal sector bases in the world, according to the International Monetary Fund (IMF). Recent statistics indicate that almost 5,2 million locals are employed in the informal economy with women constituting the majority.

The legislators have said the ongoing economic reforms should speak to the needs of SMEs and help attract foreign direct investment to unlock full potential from new business ideas being pursued by young entrepreneurs, in particular, and promoting realisation of Vision 2030.

Although the Government recognises the significance of SMEs and has come up with specific initiatives to finance young entrepreneurs, legislators say more needs to be done in creating a friendly business environment.

They noted the establishment of the Zimbabwe Women’s Microfinance Bank, Empower Bank and Small and Medium Enterprises Development Corporation (Smedco), which have started assisting SMEs.

Headlands’ legislator, Christopher Peter Chingosho, said more fiscal measures, mainly related to taxation, were needed to stimulate the informal sector economic role. He said Zimbabwe can emulate the Rwandan strategy of segmenting informal sector players into blocks for ease of tax administration.

The Zimbabwe Revenue Authority (Zimra) could then delegate the tax collection function of operators under the specified block to a coordinating authority, who could be a market or rented property owner, within that unit.

“The case study shows the ease of administration by the revenue authority where more than 1 000 informal vendors can be managed through one focal person who is the owner of the market or block for tax purposes,” said Chingosho.

He said the flea markets and industrial park model as well as home industry framework in major cities and towns should be exploited as pilot formalisation projects with successful tax collection examples.

The exercise, however, requires close collaboration between local authorities, Zimbabwe Revenue Authority and policy makers who should combine efforts in raising awareness on taxation, training and provision of key infrastructure.

The legislators said most SMEs were facing challenges in accessing financial support from mainstream financial institutions and were being frustrated by numerous processes of establishing business base by local authorities. They noted that these challenges have been worsened by the Covid-19 lockdown, which has further crippled small businesses.

Mhondoro legislator, Freddy Kapuya said formalising the informal sector should not be about taxation only but widening opportunity for the players themselves who should see more value for their families and communities.

“The benefits of the informal sector today is that it increases or improves the living standards of the people vis-a-vis the idea of increasing the tax revenue,” he said.

Bulawayo proportional representation legislator, Jasmine Toffa, said a one size fits all approach would not yield desired results as the informal sector was diverse.

“We need to walk the talk about policy. Maybe coming up with an Act to tax the informal sector . . . and make sure that the informal sector benefits from their taxation,” she said. “By this I mean that a portion or percentage of that taxation must be put into a health fund so that the informal sector has access to medical aid for their families.

“As we tax, we must not always look at taking from the citizens . . . they would have sacrificed, screamed and prayed to start their businesses in most instances without the aid of Government and loans.”

Makoni North Legislator, James Munetsi, weighed in saying more efforts were needed in increasing SMEs access to funding through tackling the collateral challenge.

Another legislator, Dr Thokozani Khupe, said increasing support for SMEs would enhance their contribution to job creation and to the fiscus. She urged women and youths to seek loans from established institutions and to pay tax to the Government.

Mberengwa East legislator, Marko Raidza, concurred saying pro-active measures were needed to harness the SMEs potential for the benefit of the whole economy. —chronicle.cl.zw