Speaker of Parliament Hon Advocate Jacob Mudenda has urged government to expedite the process of formalizing the informal sector and to spruce up taxation systems in a bid to activate domestic resources mobilization.
The World bank estimates that the informal sector dominates 60 percent of the economy.
However, the figure was since disputed by the Vendors Initiative for Social and Economic Transformation (VISET) arguing the informal sector dominates 92% of the economy.
The growth of the informal sector in Zimbabwe dates back to the early ninety’s when the government implements the Economic Structural Adjustment Program (ESAP) which led to the laying off of thousand of civil servants who had families to take care off.
Furthermore, the growth of the sector over the years has been attributed to the economic environment that has led to companies shutting up shop and pushing formal workers into the informal economy.
According to the International Labour Organization (ILO) formalization is the process of bringing informal workers and economic units under the coverage of formal arrangements, while ensuring opportunities for income security, livelihoods and entrepreneurship.
Speaker Of Parliament
Speaking at the 2023 Pre-budget seminar last Friday running under the theme –Leveraging on domestic resource mobilisation to accelerate EconomicTransformation- Hon Mudenda said the informal sector would provide a good tax base if formalized.
“Domestic resource mobilization can be achieved if we spruce up our taxation regime through sustainable digital taxation system.
“This will ensure maximization of revenue collection thereby guaranteeing optimum resource mobilization through the taxation avenue.
“Treasury should invest expeditiously in this area. In tandem, the formalization of the informal economic sector is long overdue.
“ Let us learn from Bolivia, Bangladesh and Iran on how these countries have exponentially formalized their informal economic sector.
“At the moment, 60% of our economy is the informal sector. If and when we formalize it, we are likely to increase the tax base and in so doing enhance our domestic resource mobilization for accelerated economic transformation.
The government held discussions in November 2021 in order to develop a thorough formalization policy for Small to Medium Enterprises (SMEs).
Although the talk around formalization of the informal economy were also held in 2015, time will tell whether government will walk the the talk.