Browsing by Author "Dube, Godwin."

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Informal sector taxation : the case of Zimbabwe.
(2014) Dube, Godwin.; Casale, Daniela Maria.
The economic crisis in Zimbabwe has had a profound impact on the labour market. As job opportunities in the formal sector have shrunk due to the contraction of the economy, the informal sector has been showing rapid growth. This contraction of the economy has also had a negative impact on the government’s ability to collect tax revenues. It is within this context that this study seeks to analyse the Zimbabwean government’s recent attempts to collect taxes from its large informal sector. The study draws on conventional tax theory from the public economics literature to inform the evaluation of the informal sector tax system. The study also draws on the political economy approach to taxation (and the state failure literature in particular) given that this analysis occurs in Zimbabwe, a failing state. The three main objectives of the work are as follows: 1) To describe the informal sector tax code in Zimbabwe and to explain how it relates to the broader tax system in the country, as well as to analyse the rationale for its introduction; 2) To investigate the challenges and successes in implementing the taxes in the informal sector in the context of the economic and political crisis; and 3) To analyse the informal tax system in terms of equity and efficiency. Given the lack of reliable official (quantitative) data on Zimbabwe, this study is primarily based on documentary evidence and qualitative work. Qualitative interviews were carried out with 16 key informants from the Zimbabwe Revenue Authority, the Ministry of Small and Medium Enterprises Development, academia and business organisations. A total of 47 informal sector operators from four activity classes (i.e. transport operators, flea market operators, hairdressing salons and cottage industries) were also interviewed. The findings presented in this thesis indicate that there have been some successes in taxing the informal sector in Zimbabwe. However, the study shows that informal sector taxes have been poorly administered. The findings also show that informal sector taxes are generally inequitable visà- vis formal sector taxes. Furthermore, the implementation of presumptive taxes has induced changes in behaviour among those in the informal sector in their attempts to evade these taxes, resulting in economic inefficiency. Given that very few academic studies on informal sector taxes in Zimbabwe have been conducted, it is hoped that this work will begin to fill the gap in the Zimbabwean context, as well as to contribute to the small but growing literature on informal sector taxes in developing countries more generally.
A study of the self-employed in the urban informal sector in Harare.
(2010) Dube, Godwin.; Valodia, Imraan.
State failure in Zimbabwe has had a profound impact on the labour market. As job opportunities in the formal sector have shrunk due to the contraction of the economy, the informal sector has been showing rapid growth. The restructuring of the labour market has resulted in an informal sector that is much bigger than the formal sector, a drastic reversal of the situation that existed just after the country’s independence in 1980. This growth in the informal sector has had the effect of keeping the reported unemployment figure in Zimbabwe at below 10 per cent. While this figure has been met with disbelief and derision both within and outside Zimbabwe, it is based on the application of the international definition of employment (ILO, 2008). This study analyses the impact of state failure on a segment of the informal sector - the urban informal sector self-employed and analyses how urban selfemployment has grown and developed in a context of state failure. This study also explores how this segment of the informal economy has responded to and been impacted by the economic and political crisis in Zimbabwe. The study found that state failure has had a large impact on the urban informal sector selfemployed in a number of ways. This impact has largely been in the form of (a) opportunities in filling the gap left by the collapse of the formal sector after the imposition of price and foreign exchange controls; (b) increased competition from new, more educated, entrants who were opting out of (or could not get jobs in) the formal sector; (c) increases in the number of people employed by informal enterprises (the majority of whom were non-family members); (d) the crisis/failing state’s increasing inability to enforce zoning and tax regulations. The findings suggest that there have been a lot of new entrants into the informal sector. These new entrants seem to be younger and more educated. These new entrants seem to have made strategic decisions on location, types of products they sell and the way they run their enterprises. The urban informal sector self-employed workers are not a homogeneous group. They exhibit differences in a number of areas for example, their age, the activities they are engaged in, their level of education, and the location they operate from. Zimbabwe’s price and exchange control policies exacted a heavy toll on the private sector with many formal enterprises collapsing as a result of these controls. These controls and the collapse of many formal sector enterprises presented numerous opportunities for economic rents and arbitrage. Although most of the respondents in the sample were generally happy with informal sector work, there were some who had clearly disproportionately benefited from state failure. While the study does indicate that the urban informal sector self-employed entrepreneurs do absorb a number of unemployed people, with the informal sector thus playing a distributional safety-net role not only for the enterprise owners but also for their employees, the number of people employed per enterprise seems to be too low to substantiate the view of the informal sector being a significant employer in the economy (even a failing one). The study concludes that the context of crisis/failed state has clearly created some opportunities for a segment of the population. These findings are largely inconsistent with a view that conceptualises the informal sector as an undifferentiated employer of last resort marked by low wages and difficult working conditions. While the informal sector is playing an ameliorative role as an income-generating safety net for most self-employed workers in Harare, the comparatively well-educated respondents selling high end products in the suburbs seem to have actually benefited from the conditions of state failure. The low salaries coupled with job insecurity in the formal sector have meant that the informal sector is increasingly viewed as a more preferable employment option, particularly for entrepreneurs. The returns from this type of activity have even encouraged a number of formal sector workers to increasingly participate in the informal sector to make ends meet. In a country where a formal sector worker’s salary can barely cover the rent, let alone food and other expenses, the informal sector entrepreneurs in this study perceived themselves to be comparatively wealthy.