SMEs show increased tax compliance.

Zimra’s Commissioner of Domestic Taxes, Misheck Govha, shared this positive development at the annual tax review breakfast meeting recently hosted by The Financial Gazette.
Govha highlighted that since the start of the year, 432 VAT-registered SMEs have voluntarily complied with tax laws.
“Their turnover is so high that some of them, with monthly turnovers of up to US$120 000, will be reclassified as medium and large clients,” Govha said.
Zimra’s new domestic Tax and Revenue Management System (TaRMS), which is 80 percent complete, is expected to help integrate the informal sector into the tax net.
The Small and Medium Enterprises Association of Zimbabwe chief executive, Farai Mutembanengwe praised the TaRMS for its potential to address current system shortcomings and enhance the country’s business environment.
However, Mutambanengwe also expressed concerns about the lowering of tax brackets, arguing that it could lead to confusion and potentially bring businesses into the tax net that shouldn’t be there. He warned against the risk of people getting used to not paying taxes, similar to the situation with parallel market exchange rates.
“The challenges might be the teething problems. We have had problems, for example, trying to register. I think I have had a registration for over two months, but it has not gone through.
“So those are the sort of issues, but I think when it works, especially for SMEs, I think it’s a huge plus because it will tell you the returns that you need to do whatever is overdue and so on,” he said.
A tax expert and member of the Confederation of Zimbabwe Industries’ macro-economic committee, David Masaya, echoed these sentiments. He suggested that formal businesses often feel more targeted for audits than their smaller, informal counterparts, creating a perception that compliance brings unwanted attention.
“There is a view that by being formal and trying to be compliant, you bring yourself out into the spotlight and you have this admin burden of having to go through the audits,” he said.
“If everybody could be dealt with formal and informal with equal measure and equal force, it would be appreciated.”
The Zimbabwe National Chamber of Commerce’s recent report traces the significant rise in informality in Zimbabwe back to 1991.
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