THE World Bank has found that only 6% of Zimbabwe’s informal sector pays taxes, with just one in five earning taxable income, highlighting a challenge as the government moves to scale up collections from the largely untaxed sector.
Following findings that out of the 204 798 operational establishments in Zimbabwe, a massive 76,1% are informal, the government has been ramping up its efforts to tax this sector.
This comes as the informal sector, based on the current gross domestic product by market prices for the year, is valued at US$39,8 billion.
According to the previous research by the Reserve Bank of Zimbabwe, the informal sector is estimated to transact over US$14 billion annually and have cash worth US$2,5 billion in circulation at any given time.
The World Bank findings were released during the recent 2025 Zimbabwe Economic Development Conference.
“Taxes are paid by a few (up to 6%) mostly in the goods sector. Service providers are harder to monitor,” World Bank economist consultant Abel Gwaindepi said during a presentation titled Unpacking Informality for Tax Purposes: Evidence from Urban Zimbabwe.
“User fees dominate the goods sector while permits/licences and informal payments dominate the services-sector.
“Street level officers/front desk collect these informal payments–further undermining tax morale and tax potential.”
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According to the World Bank findings, presumptive taxes introduced in 2005 have had limited success in broadening the tax base, as the earnings remain low and more entrepreneurs continue to enter the sector.
On average, based on the report, operators in the lowest income quintile barely scrape enough to cover permits, user fees and informal payments, leaving no room for tax compliance as they earn an average of US$80 monthly.
By contrast, those in the top quintile — mainly transport operators and higher-margin traders — generate significantly higher revenues of about an average of US$1 120.
Gwaindepi said tax policies often overlook diversity in earnings, sector, gender and city dynamics.
“Informal businesses face high costs of permits and licenses that are complex and time-consuming to comply with, increasing the cost of doing business e.g. hair salons require at least three separate licences (for hair, make-up and nail services),” he said.
“Qualitative discussions reveal that many informal operators have stopped pursuing the necessary permits and documentation because city council authorities and the Zimbabwean police are focused on ‘finding fault’.”
He made several key takeaways from the survey based in Harare and Masvingo to determine the overall results.
That: “Earnings inequality: Only one in five informal operators earn potentially taxable income — primarily in the transport sector; Gender gap: Women are concentrated in low-earning, easy-entry activities like TRIBUNAL buying and selling goods — making enforcement dynamics gendered;
“Low tax collection: Just 6% of traders pay formal taxes. Services are harder to tax than goods due to mobility and lack of fixed premises; Regressive compliance burden: Multiple fees, licences and permits disproportionately affect low earners — especially women in the goods sector.
“Harare shows the highest payment burden; Informal payments as an implicit tax: The number and cost of permits/licenses have led to informal payments (e.g. bribes and contributions) to become an implicit ‘tax’ collected by street-level officials, undermining tax morale and tax potential.”
The growth of the informal sector is owing to the continued deterioration of the formal space.
