SMEs renew push for simplified tax regime
SAMANTHA MADE
Zimbabwe’s small and medium enterprises (SMEs) are stepping up calls for the introduction of a simplified tax regime, arguing that the current tax framework is complex, costly, and stifling to their growth.
The sector, widely regarded as the backbone of Zimbabwe’s economy, believes that a fairer and more manageable tax structure is critical to unlocking its full potential and broadening the country’s tax base.
Farai Mutambanengwe, the founder and CEO of the SME Association of Zimbabwe, said proposals for a simplified tax structure have been consistently submitted to the Ministry of Finance. However, he noted that progress has been slow, largely due to the government’s pressing need for revenue.
“We have consistently been putting proposals to the Ministry of Finance for a Simplified Tax Regime that recognises SMEs’ limited ability to comply with complex tax structures, while at the same time offering them incentives and space to grow before being subjected to the full suite of tax heads,” Mutambanengwe said. “Unfortunately, traction in this regard has been limited due to the government’s own revenue needs at the moment.”
The Parliamentary Portfolio Committee on Industry and Commerce has echoed these concerns, warning that the existing taxation system is disproportionately burdening formal businesses while informal enterprises continue to evade tax. The Committee found that registered businesses are compelled to comply with a raft of tax laws, whereas the informal sector operates largely outside the regulatory framework, creating unfair competition in the market.
“The Committee established that registered businesses are forced to comply with tax laws while the informal sector evades tax, which certainly leaves the former at a price-competitive disadvantage. The current taxation regime is heavy on formal businesses, creating strong incentives for informalisation,” the Committee observed.
Industry associations representing retail and wholesale businesses have also raised alarm over the high cost of tax compliance. They revealed that the current tax and regulatory environment, characterised by numerous taxes and levies, accounts for approximately five percent of total expenditure for most businesses. A significant contributor to this burden is the Intermediated Money Transfer Tax (IMTT), currently set at two percent, which industry players say is among the highest in the region.
Business leaders argue that the IMTT is not only costly but counterproductive. The levy discourages the use of electronic transactions, pushing both consumers and businesses towards cash-based transactions, which undermines financial inclusion and weakens the effectiveness of monetary policy. In addition, the IMTT is non-deductible for income tax purposes, further compounding the cost pressures faced by many operators.
The Bankers Association of Zimbabwe (BAZ) has also weighed in, urging authorities to prioritise improvements in tax collection efficiency and compliance as a more sustainable strategy for enhancing domestic revenue. The Association noted that Zimbabwe, like many developing countries, faces significant challenges in tax compliance, driven by a lack of awareness, weak administrative infrastructure, and widespread mistrust of government institutions.
BAZ believes that building public trust is central to improving compliance. The Association emphasised that modernising tax administration through digital transformation would play a critical role in making the system more transparent, efficient, and accessible. Digital solutions such as real-time data processing, mobile tax filing platforms, and automated reporting could significantly reduce the administrative burden on both tax authorities and businesses, while also making tax evasion more difficult.
Simplifying tax procedures and eliminating bureaucratic hurdles are also seen as essential steps towards encouraging SMEs and informal businesses to formalise. BAZ pointed to international examples, such as Brazil’s Simples Nacional, where streamlined registration and tax processes have successfully integrated small enterprises into the formal economy. In doing so, these businesses gain access to critical benefits, including credit, social protection, and training opportunities, which enhance productivity and create conditions for sustainable growth.
The formalisation of SMEs is viewed as a key strategy for expanding Zimbabwe’s tax base without resorting to punitive or overly complex tax measures. However, policymakers face a delicate balancing act. On one hand, the government urgently needs to boost revenue amid mounting fiscal pressures. On the other, heavy-handed tax policies risk suffocating the very businesses that could drive economic recovery and job creation.
Economic analysts warn that without deliberate efforts to make tax compliance more manageable for SMEs, Zimbabwe risks perpetuating a cycle of informality and underperformance in the sector. A Simplified Tax Regime, coupled with trust-building measures, digital innovation, and streamlined administrative processes, is increasingly seen as a necessary foundation for creating a fairer, more inclusive, and resilient tax system.
The SMEs, which account for an estimated 60 percent of employment and a significant share of economic activity, have made it clear: they are willing to contribute to the national purse, but they need a tax framework that acknowledges their realities and fosters their growth, rather than one that drives them further into informality.
As revenue pressures mount, the challenge before policymakers is to adopt bold reforms that prioritise long-term economic expansion over short-term revenue collection. For Zimbabwe’s SMEs, the message is simple — simplify the tax system, or risk suffocating the very sector that holds the key to inclusive economic recovery.
