Zimra driving out informal sector formation?

23 Nov, 2018 - 00:11 0 Views

eBusiness Weekly

Gertrude Mawire
According to an IMF study from early 2018 titled “Shadow Economies around Africa: What did we learn over the last 20 years?”, tax and social security contributions determine the presence of a shadow economy in addition to other causes.

This means that the mere presence of Zimra and NSSA as they are is the major cause for the existence of the huge informal sector in Zimbabwe. This sector is said to be just over 60 percent only second to that of Bolivia which is 62,3 percent.

The informal sector referred to in the study is not that of illegal activities. It is simply legal activities which are not performed formally. In those businesses, there is no record keeping, no planning sometimes. Someone just wakes up jobless one day and decides that they want to make and sell peanut butter. They find an affordable peanut butter making machine at Magaba and start buying peanuts and crushing them and sell the produce. They do not have any invoices; neither do they keep the invoices they get from their clients. The person does not even consider what their tax obligations are, social security, city council by-laws, agricultural marketing authority and the many other numerous compliance requirements that a Zimbabwean business has to grapple with.

Service industry players like accounting, business consultancy, customs brokerage and tax service providers have also been operating informally and not meeting the required compliance requisites of their industries.

However, of late, Zimra and some powerful industry regulators like the (PAAB) Public Accountants and Auditors Board, with the blessings of Industry Associations like (ICTA) Institute of Certified Tax Accountants appear to be discouraging the formation of the informal sector in the customs brokerage and tax consultancy services sector through its licensing requirements and its other restrictive activities at ports of entry and tax offices. In order to practice in the tax consulting field, one has to be a fully paid up registered member of these organisations.

Now with the current economic environment obtaining in the country, it will be no surprise to see someone who is well-experienced in the industry with the required qualification failing to practice in the industry and probably becoming destitute.

This is because they will fail to fund the huge registration fees, exemption fees etc. required in order to get the practicing certificate which could run into a thousand dollars.

Some months ago, we spoke about agent licensing in this column. Just before the publishing of the article, I had engaged a grouping of customs & excise practitioners just to gauge the tempo.

While acknowledging that the requirement for a customs qualification was irreversible, a lot of the participants in the discussions appeared beleaguered by the way the legal jargon put forth the requirements of the legislation.

This was a group of the properly registered agents who obviously will benefit a lot if the industry is closed off to other players.

If you visit Zimra Kurima House in Nelson Mandela, Harare, you will meet a glaring notice by the doorway boldly declaring “Zimra does not serve touts’’. Now this is at a public office where every citizen should be free and comfortable to approach the officer for assistance. How does one know whether they will be labelled a tout when they get to the counter?

I assume the few “real” touts will know themselves probably from being called names by the counter officers. I am saying these people are few and well known by the Zimra officers. Like the Roadport, Eastgate, Ximex Mall money changers, Kurima House parking lot is their workplace. Some do have small offices in and around the city centre but spend most of their time by Kurima House.

Now, on paper and on bold notices, these people will not be assisted by Zimra officials if they bring business other than their personal business.

On the ground, after a few weeks from the campaign they will be assisted because for all intents and purposes, these people are contributing positively to tax compliance in Zimbabwe. (That is when they are not in a deal with a Zimra officer, if you meet them at an illegal entry point). They are simply informal customs and tax brokers who cannot meet the high cost of formalising their businesses just like any other business in Zimbabwe.

They are serving a customer base which will not afford to pay the huge hourly fees charged by the bigger well established companies. So compliance might even take a dip if they close off these players.

While the requirement to register if you are a customs broker is not a new thing and the new qualification changes are slowly being accepted by the industry, trying to formalise the tax broking work now may cause a lot of joblessness in the industry.

Zimra should carefully consider any changes it may want to introduce into the field at this moment until the economy has stabilised. I think for now the concern should only be the correctness of the documentation submitted.

After all, even the properly registered tax accountants may also engage in tax evasion and some illegal activities. Most unregistered tax consultants are knowledgeable but only lack the paperwork. Where possible any new requirements should be introduced in a flexible manner which takes account of age of the practitioner, years spent in the field and references.

Disclaimer: This article is not meant to create a consultant/client relationship. Readers are advised to consult their consultants for specific advisory services.

Gertrude Mawire is a fiscal compliance and investment advisor based in Harare. She writes in her personal capacity. Gertrude, a member of ZNCEE ( customs & excise experts) holds an MSc in Finance & Investments (NUST) Bachelor of Business Studies (UZ), IOBZ Diploma various other Certificates. She can be contacted on [email protected].

 

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