$20m package for women, youth projects

Business Reporter
TREASURY says a $20 million package will be set aside this year for capacitating women and youth entrepreneurs as part of Government’s drive to enhance growth of small to medium enterprises in the country.

With the demise of big companies in the last few years, Zimbabwe has witnessed a quick growth of the informal sector, which has become a critical economic pillar employing millions of people.

Responding to questions in Parliament last week, Finance and Economic Development Minister Patrick Chinamasa said the funding would be accessible through the Small Enterprises Development Corporation (Sedco) and the yet to be formed women and youth banks.

“With respect to capacitating Sedco, we have made a provision for it, $2 million, but we have also said any taxes from SMEs are going to be ring-fenced to capitalise Sedco. So, any presumptive taxes are going to capacitate Sedco,” he said.

“We are going to capitalise the Women’s Bank with $10 million, it is a micro-finance bank. I am also going to give an equal amount of $10 million to the Youth Bank. All this is recognising that the new economy now is SMEs and that they should have access to funding.”

In the 2017 national budget, the Government acknowledged the role played by SMEs and announced a raft of tax incentives meant to support formalisation of small businesses and increase the sector’s contribution to the economy. Informal traders have long complained over the country’s tax regime, which they view as “punitive” to their operations.

“Most SMEs are reluctant to register for (value added tax) VAT due to the massive backdated taxes and penalties that they are likely to incur upon registration,” said Minister Chinamasa while presenting the budget in December.

“In order to facilitate VAT registration for SMEs that qualify on account of their gross turnover exceeding the threshold of $60 000 per annum, it is proposed to waive the requirement to account for output tax from the deemed date of qualification for registration.”

Eligible SMEs, said Minister Chinamasa, will thus account for VAT from the date of registration. The incentive would only apply to SMEs whose turnover does not exceed $240 000 per annum and also voluntarily register for VAT with Zimra.

VAT is an indirect tax on consumption, charged on the supply of taxable goods and services and is levied on transactions rather than directly on income or profit.

In order for SMEs to transact with private and public sector entities as corporate suppliers within the value chain, they must be registered for VAT.

Most SMEs are, however, reluctant to register for VAT.

SMEs that voluntarily register with Zimra will only account for provisional tax during the first year of registration, when the fourth quarterly payment date falls due, said Minister Chinamasa.

The Government introduced presumptive taxes on selected sectors of the economy after noticing the increase of unregistered businesses such as restaurants, bottle stores, hair salons and others to broaden the tax base.

SMEs constitute more than 60 percent of the country’s employment base and are a fast-growing sector, which contributes a sizeable chunk to the country’s gross domestic product.