A working model towards taxing the informal sector: the case of Harare Rezende street tuck-shops.

Abstract

This study investigates the feasibility of developing a working model for taxing the informal sector in Zimbabwe, using the numerous tuck-shops operating on Harare's Ruzende Street as a specific case. The informal sector represents a significant portion of Zimbabwe's economy, yet its contribution to the national revenue base remains largely untapped. This research aims to understand the operational dynamics, challenges, and perceptions of tuck-shop owners regarding taxation, alongside the perspectives of key stakeholders within the Harare City Council and the Zimbabwe Revenue Authority (ZIMRA). Through a qualitative approach employing face-to-face interviews and focus group discussions with tuck-shop operators, local authority officials, and tax authority representatives, this study seeks to identify the key obstacles and opportunities associated with formalizing revenue collection from this segment. The research explores existing knowledge and attitudes towards taxation among informal traders, their current record-keeping practices, and their capacity to comply with tax regulations. Simultaneously, it examines the current policies and challenges faced by the Harare City Council and ZIMRA in engaging with and taxing the informal sector. The findings of this study are expected to inform the development of a context-specific taxation model that is both effective in revenue generation and sensitive to the unique characteristics and constraints of informal businesses. The research will explore potential simplified tax regimes, appropriate assessment methods, and the role of technology in facilitating compliance. Furthermore, it will investigate the support mechanisms and incentives that could encourage informal traders to participate in the formal tax system, ultimately contributing to enhanced local development and national revenue mobilization. This case study of Harare's Ruzende Street tuck-shops offers valuable insights applicable to broader efforts aimed at integrating the informal sector into the formal tax framework in Zimbabwe and similar developing economies.