WE ARE REWARDING EVASION, SAYS MTHULI

The government has admitted that companies in Zimbabwe make more money on the wrong side of the law than when complying with it, exposing a regulatory system that punishes honesty and rewards evasion — even as it vows to aggressively expand the tax base.

Last week’s official announcement by the Zimbabwe National Statistics Agency that the informal sector has grown by 16,1 percentage points to 76,1% shows that the formal space is fast shrinking.

The staggering jump in informalisation is a clear acceleration of economic distress as more businesses flee the formal sector under the weight of taxes, red tape and policy uncertainty.

Going into 2025 Mid-Term Budget Review presented yesterday, most businesses, business membership organisations and economists called for relief to growing regulation and over taxation.

While presenting the review in Parliament, Finance, Economic Development and Investment Promotion minister Mthuli Ncube in off-the-cuff remarks confirmed that more money was being made outside compliance.

“During the second half of the year, government will be seized with the implementation of business reforms, targeting the reduction of fees and charges as well as regulatory requirements and the number of steps in acquiring licences for example,” Ncube said.

“This will significantly reduce the operating costs for industry to enable it to compete both domestically and internationally.

“We have a situation where in some sectors, players or private players are only profitable if they don’t comply with regulatory requirements.

“If they comply, they make losses and that situation needs to be changed. We will lower the cost of doing business.”

As part of these efforts, Ncube announced that the government will be reviewing regulatory fees and charges, bureaucratic steps and compliance sector by sector starting with agriculture.

He said the agricultural sector would be the first to be reviewed starting in a week or two.

According to the central bank, the informal sector, which is largely unregulated, at an informalisation level of 60%, generated US$14,2 billion in annual revenue competing with the formal sector.

The key complaints raised by the business community include multiple taxes, over taxation and additional tax assessments. Newsday

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