Zimbabwe’s government may be putting the brakes on a controversial plan to curb informal trade and raise the value-added tax (VAT). The move comes amid concerns from businesses and the public about the potential negative impacts.
The proposed measures, which went into effect on January 1, 2024, would require businesses to source goods only from registered and tax-compliant entities, effectively cutting out many informal traders who operate outside the formal economy. Additionally, the government planned to raise the VAT rate from 15% to 20%.
However, these plans have faced strong opposition from various quarters. The Confederation of Zimbabwe Industries (CZI), which represents some of the country’s biggest companies, has lobbied against the restrictions on informal trade, arguing that they would harm businesses and consumers alike. Informal markets are a major source of livelihood for many Zimbabweans, and concerns have been raised that cracking down on them could lead to job losses and higher prices.
The government’s proposed VAT increase has also been met with criticism. Critics argue that it would place an additional burden on already struggling consumers and businesses.
In light of these concerns, the government appears to be reconsidering its plans. CZI CEO Sekai Kuvarika recently met with government officials to discuss the issue, and she reports that a “moratorium” has been granted, allowing businesses to continue trading under the December 2023 conditions while discussions continue.
