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Zimbabwe govt makes electronic money usage compulsory for businesses
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The Zimbabwean Cabinet has approved the compulsory use of electronic money by all businesses in a bid to formalize the country's largely informal economy and enhance fiscal revenue collection. The move is part of a broader effort to bring informal businesses under the tax bracket and level the playing field for formal enterprises.
The informal sector has been a dominant force in Zimbabwe's economy, contributing approximately 65% of the Gross Domestic Product (GDP) and employing a significant portion of the workforce. However, this dominance has come at a cost. Between 2020 and 2023, Zimbabwe is estimated to have lost at least US$1.15 billion in potential fiscal revenue due to the informal nature of these operations.
The government has faced increasing pressure to act, as the rise of informal businesses has led to the closure of major retailers that were key sources of tax revenue. These challenges have underscored the need for reforms to regulate and tax the informal sector.
Speaking at a post-Cabinet briefing on Tuesday, Information Minister Jenfan Muswere said the government would make the use of electronic money mandatory for all businesses. He explained that the measure would be enforced through the introduction of a compulsory tax payment system to ensure compliance and the establishment of a Domestic Inter-agency Team to monitor adherence to tax laws.
The framework also includes the licensing of vendors by local authorities in coordination with the Central Government. This step is expected to help integrate informal businesses into the formal economy and improve the effectiveness of Zimbabwe's foreign exchange market.
In addition to the immediate measures, the government has pledged to address long-term challenges that hinder the formalization of businesses. Plans are underway to streamline fees and charges, minimize duplication of work by government agencies, and improve the ease of doing business. The government also intends to upgrade and construct power plants, enhance the electricity distribution network, and incentivize the use of alternative energy sources.
Efforts will also be made to expand social protection programs to cover workers in the informal sector, providing them with a safety net as they transition into the formal economy.
The new policy framework is seen as a critical step in reducing economic informality, boosting tax revenues, and creating a more sustainable business environment. While the measures are ambitious, their success will depend on effective implementation and the government's ability to address underlying infrastructure and regulatory challenges.
By mandating the use of electronic money and introducing measures to support formal businesses, the government aims to create a more resilient and equitable economy that benefits all Zimbabweans.
The informal sector has been a dominant force in Zimbabwe's economy, contributing approximately 65% of the Gross Domestic Product (GDP) and employing a significant portion of the workforce. However, this dominance has come at a cost. Between 2020 and 2023, Zimbabwe is estimated to have lost at least US$1.15 billion in potential fiscal revenue due to the informal nature of these operations.
The government has faced increasing pressure to act, as the rise of informal businesses has led to the closure of major retailers that were key sources of tax revenue. These challenges have underscored the need for reforms to regulate and tax the informal sector.
Speaking at a post-Cabinet briefing on Tuesday, Information Minister Jenfan Muswere said the government would make the use of electronic money mandatory for all businesses. He explained that the measure would be enforced through the introduction of a compulsory tax payment system to ensure compliance and the establishment of a Domestic Inter-agency Team to monitor adherence to tax laws.
In addition to the immediate measures, the government has pledged to address long-term challenges that hinder the formalization of businesses. Plans are underway to streamline fees and charges, minimize duplication of work by government agencies, and improve the ease of doing business. The government also intends to upgrade and construct power plants, enhance the electricity distribution network, and incentivize the use of alternative energy sources.
Efforts will also be made to expand social protection programs to cover workers in the informal sector, providing them with a safety net as they transition into the formal economy.
The new policy framework is seen as a critical step in reducing economic informality, boosting tax revenues, and creating a more sustainable business environment. While the measures are ambitious, their success will depend on effective implementation and the government's ability to address underlying infrastructure and regulatory challenges.
By mandating the use of electronic money and introducing measures to support formal businesses, the government aims to create a more resilient and equitable economy that benefits all Zimbabweans.
Source - NewZimbabwe
