Online Reporter
Farirai Machivenyika
Senior Reporter
THE advent of e-commerce and online marketplaces has brought to the fore new challenges for formal retailers, the Parliamentary Portfolio Committee on Industry and Commerce has said.
In its report tabled in the National Assembly last week, on operational challenges being faced by wholesalers and other formal retail operations, the committee, which is chaired by Zaka South legislator Cde Clemence Chiduwa, said the rise of online platforms was also eating into the client base of formal operators.
“The rise of online sales platforms, including classified ads and informal social media sellers has introduced a new dimension to the growing informal market,” reads part of the report.
“These sellers operate without paying taxes or complying with regulations, do not incur rental costs or compliance fees, and often avoid customs duties and Value Added Taxes, making their goods cheaper than those sold in formal stores.
“As a result, customers prefer online informal businesses due to lower prices, leading to unfair competition for formal retailers.”
The committee said the retail and wholesale associations informed them that their members face huge costs in their efforts to remain compliant with the country’s tax and regulatory environment.
“The current framework, characterised by numerous taxes and charges, accounts for approximately 5 percent of the expenditure for most businesses. The Intermediated Money Transfer Tax (IMTT), set at 2 percent, is notably the highest in the region, deterring the adoption of electronic transactions and pushing the economy towards a cash-based system.
“This shift undermines financial inclusion and the efficiency of monetary policy measures. Additionally, IMTT is not deductible for income tax purposes, adding an extra cost burden for many operators,” the report further reads.
The committee added that the formal retail sector was overregulated ranging from registration fees, compliance fees, multiple retail licenses and excessive bureaucracy making operations difficult.
“The formal retail and wholesale sectors are encumbered by an excessive number of licenses and permits required to operate legally. Running a single supermarket necessitates obtaining over 30 different licenses and permits, each associated with significant costs and administrative procedures.
“This complex regulatory framework not only increases operational expenses but also diverts valuable time and resources away from core business activities. Consequently, many small and medium-sized enterprises (SMEs) are deterred from formalising their operations, opting instead to remain in the informal sector to avoid these burdens. This situation creates an uneven playing field, as informal operators can offer lower prices by circumventing compliance costs, thereby attracting a larger customer base.”
