• Finance Minister Mthuli Ncube proposes council vendor licence renewals will require ZIMRA presumptive tax compliance through a shared digital platform
• The move targets the informal economy to widen taxpayer participation
• Success depends on simple tax rates, one integrated payment portal, and tangible benefits like credit access

Harare- Finance Minister Professor Mthuli Ncube has proposed linking the renewal of local authority vendor licences to compliance with Zimbabwe Revenue Authority presumptive tax requirements, using council records to bring more micro and small businesses into the national tax system.

The proposal would allow councils and ZIMRA to share registration and payment information through integrated digital platforms, making tax compliance part of the process through which traders retain permission to operate. Its economic rationale lies in widening taxpayer participation at a time when Treasury is already collecting record amounts from formal transactions, wages and company earnings.

Zimbabwe collected ZiG137.8 billion, equivalent to about US$5.15 billion, during the first six months of 2026. Revenue exceeded the ZiG124.4 billion target by ZiG13.4 billion, producing a positive variance of 10.8%. VAT contributed 28% of the total and remained the largest tax head, followed by personal income tax at 17%, corporate income tax at 14%, excise duty at 8% and the Intermediated Money Transfer Tax at 6%.

The revenue composition establishes why Treasury is seeking wider participation. VAT generated approximately ZiG39 billion, equivalent to about US$1.44 billion, through transactions already visible to the tax authority. Formal retailers, manufacturers, service providers and registered importers collect the tax through fiscalised systems and remit it to Government. Personal income tax reaches employees on formal payrolls, and corporate income tax reaches companies declaring taxable profits. The most accessible part of Zimbabwe’s tax base therefore remains economic activity already recorded through formal institutions.

The proposed vendor licence mechanism seeks to extend that visibility. A trader operating from a council market, shop, stall or designated vending site may remain outside the national tax register and still be known to a municipal authority. Councils hold names, locations, business categories, licence histories and renewal dates. ZIMRA administers presumptive taxes through a separate system. Linking the two databases would close the administrative gap between local permission to trade and national tax participation.

The policy is grounded in information already held by Government. ZIMRA would no longer need to identify every trader through separate inspections and enforcement operations. A shared platform could issue a tax identifier at registration, assign the appropriate presumptive tax category, record payments and confirm compliance before renewal. Every annual licence application would become a predictable point for updating taxpayer records and collecting outstanding obligations.

The reform also responds to a long running complaint from Zimbabwe’s formal private sector. Registered companies carry corporate income tax, VAT administration, PAYE, withholding taxes, pension obligations, regulatory levies and reporting costs. Smaller businesses can serve the same customers under council licences with limited participation in national taxation. This cost difference affects pricing, margins and competitive positioning across retail, transport, food services and personal services.

Broadening the base gives Treasury an alternative to extracting additional revenue from taxpayers already inside the system. The first half revenue result shows that the existing tax machinery is performing strongly. VAT exceeded every other tax head, and total collections came in ZiG13.4 billion above target. Continued reliance on the same businesses and consumers can place pressure on disposable income, corporate cash flows and formal sector competitiveness. Bringing licensed SMEs into the system distributes the obligation across a larger share of economic activity.

The expenditure position strengthens the case for improving the quality of the tax base. Government spent ZiG123.6 billion during the first half, leaving revenue ZiG14.2 billion above expenditure. Treasury directed the surplus towards public debt and arrears owed to service providers. The additional collections therefore supported balance sheet repair and settlement of existing obligations instead of financing a broad expansion in Government spending.

That matters because Zimbabwe’s fiscal constraints arise from debt, arrears and limited access to affordable external finance. A wider taxpayer register can support revenue growth without an immediate increase in tax rates. Sustained collections can also improve Government’s capacity to clear supplier balances, service debt and fund public services from current income.

VAT’s dominance carries a wider economic reading. The tax reaches a broad range of goods and services and provides Treasury with recurring revenue from consumption and business turnover. Its strength can arise from transaction growth, improved fiscalisation, price movements and stronger enforcement. It also places part of the tax burden on consumers through the final prices of goods and services.

A fiscal system relying heavily on consumption taxes therefore needs to be assessed alongside household incomes and purchasing power. Strong VAT collections support fiscal stability. A rising tax burden on consumption can eventually weaken demand, compress retailer volumes and increase the cost of essential goods. Base broadening through SMEs can improve the balance by increasing taxpayer participation before Government seeks further revenue from formal transactions.

Personal income tax contributed 17% of total revenue and corporate income tax contributed 14%. Together, these taxes show that formal employment and company profitability remain important sources of fiscal income. The Intermediated Money Transfer Tax added another 6%, linking Government revenue to payment activity across banks, mobile platforms and other financial channels.

The revenue structure gives the SME formalisation proposal a second commercial purpose. A trader entering the tax system begins building an official operating record. Licence renewals, tax payments and digital transactions can create evidence of business continuity and cash flow. Banks, insurers, suppliers and microfinance institutions can use that information when assessing credit, insurance and trading relationships.

Formalisation can therefore expand access to working capital, merchant payment services, asset finance, supplier credit and insurance. Many small enterprises remain excluded from conventional finance because they lack accounts, verifiable turnover and a recognised operating history. Integrated licensing and tax records can reduce part of that information gap.

Local authorities also stand to gain. Shared systems can improve trader identification, reduce duplicate and fraudulent licences, strengthen collection records and expose businesses operating without valid permits. Councils would gain a clearer picture of activity within markets and commercial areas, improving planning for sanitation, security, infrastructure and market space.

The design of the presumptive tax regime will determine whether businesses remain inside the licensed system. Microenterprises operate across different income levels and business models. A street trader with limited daily turnover cannot carry the same obligation as a wholesaler operating several outlets. Licence category, location, turnover and activity need to determine the applicable payment.

Fixed charges disconnected from earning capacity can cause traders to abandon licence renewal and move into unregulated spaces. That outcome would weaken council revenue, reduce taxpayer visibility and intensify enforcement costs. A graduated structure creates a more credible pathway from survival trading into established SME status and eventually into the ordinary tax regime.

The reform must also prevent overlapping charges from becoming an excessive operating burden. Vendors already pay rentals, market fees, licence charges and other council levies. Presumptive tax adds a national obligation to the same business. A single digital portal should display each charge, the period covered, payment history and compliance status. Traders should be able to settle obligations through one process and receive immediate confirmation.

Reliable technology becomes a core policy requirement. Database errors, delayed payment confirmation and mismatched identity records can prevent compliant traders from renewing licences. The system needs clear service standards for correction, appeals and temporary approval during disputes. Councils also need an incentive to maintain accurate records because failed ZIMRA verification can delay their own licence income.

Data protection requires equal attention. Integrated systems will hold personal identification, commercial activity and payment information across several public institutions. Access controls, audit trails and procedures for correcting inaccurate records should form part of the implementation framework. Tax enforcement gains legitimacy when businesses can verify what Government holds and challenge incorrect liabilities.

Treasury should measure the programme through active compliance and commercial progression. The useful indicators include the number of active taxpayers added, renewal rates, revenue collected per registered trader, administration cost per taxpayer, businesses moving into higher turnover bands and enterprises graduating into ordinary tax registration. Credit access and digital transaction activity among newly formalised businesses would provide an additional measure of economic value.

Formal companies also need evidence that broader participation changes the direction of future tax policy. The reform will gain stronger support when additional SME revenue reduces the frequency of new taxes, higher withholding rates and increased transaction charges imposed on existing taxpayers. Tax base expansion carries the greatest value when it improves the distribution of the fiscal burden across the economy.

Implementation should begin with local authorities that already maintain reliable digital licensing systems. A pilot can test identity matching, tax classification, payment confirmation and renewal processing before national rollout. First time participants should receive a defined transition period for registration, education and settlement. Compliant businesses should receive immediate digital clearance.

Professor Ncube’s proposal converts the municipal vendor licence into a national tax administration gateway. It uses institutions that already register small businesses to reduce the cost of finding and taxing them.

Zimbabwe’s first half revenue performance shows that Government can collect strongly from visible transactions, payrolls and corporate earnings. The next fiscal gain lies in expanding visibility across the businesses operating under local authority permission.

The reform will succeed when legal participation remains cheaper and commercially more useful than operating outside the system. Simple charges, reliable technology and recognised financial benefits can expand the taxpayer register, strengthen SME financing and distribute the tax burden more evenly. High fixed costs and licence denial can push businesses beyond the reach of both councils and ZIMRA.

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