SME tax reforms gathering pace: Nyoni

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Small and Medium Enterprises Development minister, Sithembiso Nyoni

BY FREEMAN MAKOPA
Government is intensifying the development of simplified tax for small and medium enterprises, a Cabinet minister has said.

Small and medium enterprises have been imploring government to put in place a simplified tax regime for the sector in order to promote compliance with national tax regulations and requirements.

Generally, simplified tax systems for micro and small enterprises in developing countries are meant to facilitate voluntary tax compliance and remove obstacles in moving towards business formalisation and growth.

Women’s Affairs, Small and Medium Enterprises Development minister, Sithembiso Nyoni told NewsDay Business that the ministry and other stakeholders had developed a tax system which will be considered by the Zimbabwe Revenue Authority (Zimra).

“Micro, small, medium enterprises (MSMEs) have indicated that the tax registration system is too cumbersome and the tax rates are too high,” Nyoni told NewsDay Business.

“The ministry together with MSMEs associations and other stakeholders developed a simplified tax system for MSMEs for Zimra’s consideration.

“The ministry is also engaging the Ministry of Finance and Economic Development to facilitate the review of the tax system for MSMEs in Zimbabwe,” she said

Nyoni said the ministry had been collaborating with Zimra and MSME associations to facilitate education and awareness campaigns on taxation requirements and processes.

The campaigns have created dialogue between Zimra and MSMEs to discuss the demand and supply bottlenecks to tax compliance.

It is estimated that approximately 60% of Zimbabwe’s economic activity is carried out in the informal sector.

There are formal and informal SMEs in Zimbabwe and they remain one of the local economy’s conundrums as the government keeps searching for ways to incorporate the informal sector into the mainstream economy.

This is also expected to promote the growth of formal SMEs.

Normally, the simplified tax regime is rolled out in the form of simple lump sum or fixed amount taxes (also known as patents).

These are usually targeted at microenterprises, taking into account that such businesses are often operated by illiterate or semi-literate entrepreneurs.

Experts say despite the operation of a special simplified tax regime, in some cases small firms may be deterred from formalising due to perceived excessive tax burdens, compliance costs, and risks (including risks of punishment for real or alleged non-compliance).

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