RBZ Emphasise The Need To Formalise The Economy

The Reserve Bank of Zimbabwe (RBZ) has said that it is essential to formalise the economy considering the huge adverse impact a huge informal sector has on the economy.

RBZ governor, Dr John Mangudya told Business Weekly in an interview that increasing production in the economy and formalising most business activities in the country were the ways through which economic woes could be eradicated. He said:

This economy is more like a dual economy now, it has an informal sector, which is about 60 percent and the formal sector, which is about 40 percent. What is happening is that money comes from the formal to the informal sector and gets trapped there.

Zimbabwe’s economy which is currently grounded following the 2008 meltdown has since 2009 been on a recovery path but has started going South again thereby triggering the emergence of the informal sector as the formal sector collapsed.

Besides trapping money, the informal sector constitutes a soft spot for revenue leakage as it is very hard to tax with some players engaging in tax avoidance and or evasion or both.

More: The Herald


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2 comments on “RBZ Emphasise The Need To Formalise The Economy

  1. How can you formalise a business in an environment of high taxes. this economy will not formalise because there are no incentives to formalise. 1. how can you bank money that you cant withdraw when you need it.
    2. how can one economy have a difference in value of money between cash and electronic money, that’s arbitrage.
    3. There still rampant corruption in government, its now two years since the new dispensation came to power and they are still talking about ease of doing business reforms.
    4. Its now very expensive to run a formal business in Zimbabwe, the taxes are too high and the economy cannot be excited in an environment of high taxes, there is no disposable income. All income is going to govt. Imagine paying 15% sales tax,up to 40% income tax, 2% tax electronic transaction, rural electrification tax, fuel taxes, airtime tax and a lot more not mentioned here. Its now a tax country – and then you expect businesses to formalise – forget it.

    1. Its much better producing and selling behind your house, no one will collect those unbearable taxes from you. In this environment only the informal will survive, come January 2020 most formal businesses are not reopening, they are closing forever sending workers into the street.

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