An analysis of the fiscal potential of the informal sector on Zimbabwe’s revenue base: The case of Glenview home industries

Abstract

The need to attract resources to boost Zimbabwe’s revenue base from the informal sector has attracted debates within the academia, development advocates, revenue administrators, donor agencies, among others. There is general consensus on the potential of the informal sector towards development, employment creation, poverty reduction and tax revenue contribution to both government and subsequently subgovernment units. In this regard developing countries which are struggling to broaden their revenuebaseshave been left with limited options. It has been quite difficultto mobilise idle resources particularly revenue from the untapped and under–tapped informal sector. Places such as Glenview furniture industries have attracted attention from various quarters where there is general appreciation on their potential to the national purse. Hence, this study sought to get into detail of how Zimbabwe can derive benefits from its informal sector which has been flourishing and growing every day despite the fact that it is not bringing benefits directly to the central government. The research reviewed literature on the informal sector, highlighting experiences from other countries and outlining a theoretical framework guiding the research. The study used key informant interviews and documentary review to gain insights about the informal sector. Also, questionnaires were administered to operators at Glenview home industries. The researcher also made some observations on how these operators work and transact. The study found out that there are shortfalls in the legislative framework governing the harnessing of tax resources from the informal sector as well as the poor capacity of responsible institutions. The study concluded that the informal sector can make meaningful contributions to the national fiscus, especially when capital is invested and more markets availed to the informal traders. The study therefore recommended that Zimbabwe should take a leaf from other country experiences such as China, Ukraine and Brazil which have premised their development on the informal sector which now constitutes their small to medium enterprises. Also, it is recommended that the government put in place strong and certain legislation both at national level and at local authority level. On a micro level the study recommends the injection of capital and ready markets to operators at Glenview Home Industries.