Research in Brief 35

Interest is growing in taxing small-scale traders in developing countries in both the academic literature and the policy arena. This interest is due to the large and often growing portion of small-scale businesses in many developing economies, which is eroding their formal tax bases. Zimbabwe is slowly, but increasingly taxing this sector. In 2005 the country introduced a simplified tax regime targeting small-scale businesses, requiring them to pay a presumptive tax instead of the standard corporate tax. Initially, only a limited number of business types were subject to the presumptive tax. However, in 2011 additional small-scale business types were included in the regime. The interest to tax the small-scale sector emanates from the gradual but significant increase in the number of small-scale traders and the reduction in formal tax revenue as a result of a decline in economic activities. As a percentage of its total economy, Zimbabwe has the second largest informal sector in the world, with 60.6% of its economy engaged in small-scale business. However, as the drive to tax more small-scale businesses is increasing in Zimbabwe, the reality of taxing this sector is unclear. Accordingly, this study aims to answer the following questions: 1. What kind of taxes do flea market traders pay in Zimbabwe? 2. What proportion of a flea market trader’s income is paid in taxes? 3. Is there gender disparity in the taxation of flea market traders? This ICTD Research in Brief is a two-page summary of ICTD Working Paper 93 by Waziona Ligomeka.

 

 

Authors

Waziona Ligomeka

Wazi is a doctoral candidate at the Institute of Development Studies. His research interests include taxation, budgeting, public finance, aid effectiveness, economic development, international trade, regional integration, and evaluation of public policy. He has over nine years work experience with the Ministry of Finance in Malawi as a Chief Economist and Special Advisor to the Secretary to the Treasury.
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