COVER PAGE

TOPIC

A framework for enforcing tax revenue collection from

informal traders in Zimbabwe.

PROGRAMME
RESEARCH PROPOSAL
A dissertation proposal submitted in partial
fulfilment of the requirements for the Master
Submitted By Group 11 Members
Degree in Business Administration.
Name Reg Number

1. Artwell Mamvura R082458G

2. Faith Mazuzu R191260C
3. Brian Zungu R191298R SUBMISSION DATE
4. Tafadzwa Diwura R191259K 27 March 2021
5. Jacqueline Chirowodza R191182L
6. Farai Musendo R115156P
7. Artwell Marinda R191184Y
8. Takudzwa Mbiriri R191201K
9. Tapuwanashe Mhururu R191189M
Contents Page

1. Topic 1
2. Introduction 3
3. Study Background 4
4. Statement of the problem 5
5. Research aim and objectives 6
6. Research questions 7
7. Proposition 8
8. Scope of research/Delimitation of the study 9
9. Significance of research 10
10. Brief critical literature review 11
11. Research Methodology 13
12. Ethical issues 17
13. Action plan 17
14. References 18
Introduction
01 Purpose
• The study will establish a
framework for collecting
taxes from informal traders
in Zimbabwe.
• The study will review
possible initiatives that can
be adopted to enforce tax
payment by informal traders
in Zimbabwe.
• The research will also
address the questions about
which initiatives should be
prioritized by government in
order to improve revenue
collection from informal
sector.
02 Research Gap
• Previous studies focused on
methods of tax collection
strategies broadly looking at
developing countries in mainly
in west African such as Ghana
and Nigeria.
• The studies that focused on
Zimbabwe mainly dwelled on
identifying challenges but did
not come up with a framework
to address these challenges.
• This limited Zimbabwe specific
literature presences a research
gap which calls for further
studies in this area.
03 Research Layout
This proposal cover the following
sections;
• Introduction
• Background to the study,
• Problem statement,
• Research objectives,
• Research questions
• Proposition
• Scope of the study
• Significance
• Literature review
• Research methodology
• Ethical issues and lastly,
• Action plan.
Study Background
Nature and problem impact
• ZIMRA (2009) noted that
there is huge amount of
money that goes untaxed in
the informal sector and this
poses a threat to the
stabilization of the economy.
• Informal traders have been
avoiding tax payment citing
high tax rates, complex
registration, costly
compliance ,low risk of
detection and a lack of
confidence in the government
(Baer, 2003)
Statistics Previous Solutions
• In Ghana presumptive taxes were
• According to Medina and
attempted since 1985 to collect taxes
Schneider (2018) Zimbabwe has
through transport associations but this
the second largest informal
was not effective and was abolished in
sector as a percentage of its total
2003 (Ayee,2007).
economy in the world, with 60%
engaged in informal activities. • In 2005, Zimbabwe introduced
Presumptive Tax which was further
• Research by Finmark Trust
enforced in 2011 in view of the
(2013) has shown that only 2%
increasing informal sector business.
of informal traders in Zimbabwe
pay taxes with 98% excluded • ZIMRA has been unable to accurately
raising questions about the
determine informal sector income due
reasons behind the high tax non
to poor integration with the regular
compliance behaviour in the
tax system (Bird and Wallace, 2003).
informal sector.
Statement of the problem
 According to Mangudhla and Mambo (2013) ZIMRA had been surpassing revenue targets until 2012 relying on formal
taxes but deindustrialisation triggered spiral of informal sector growth .As a result of these complexities in taxing
informal sector ZIMRA missed its tax revenue collection targets from 2013 to 2016 (Sikwila et al, 2016).

 There is a notable economic growth contribution from informal sector of about 50% of the Gross Domestic Product
(GDP) (2016 National Budget Statement). ZIMRA (2015) noted that rapid growth of street vendors signifies many
potential taxpayers but however were not yet included in the country`s tax net.

 According to Finmark Trust (2014) in Zimbabwe, 36% of the 5.7 million informal traders earn above US$301.00 that is
more than the minimum taxable threshold of US$300.00. However according to RBZ (2012) only 16% were paying
taxes while the rest are still outside the tax net.

 ZIMRA in its 2016 revenue performance report indicated that there has been a 7.22% decline in revenue which was
also attributed to subdued collection from informal sector.

 Presumptive tax policies aimed at improving revenue collection from this sector were implemented yet the players are
still not complying with tax laws. The informal sector is fast growing but the growth does not seem to match the
revenue collections from the informal sector (Dube, 2014).
Objectives
Main Objective
 To establish a framework for enforcing tax collection from informal traders in Zimbabwe.

Specific Objectives

 To establish the effects of indirect taxation such as VAT in enforcing payment of tax by informal traders.
 To assess the role of formalisation incentives in enforcing tax compliance by informal traders in Zimbabwe.
 To investigate how empowering of informal traders will assist in enforcing tax collection in Zimbabwe.
 To establish the role of a dedicated a tax unit for informal traders in enforcing tax collection in Zimbabwe.
 To assess the effect of collecting revenue through associations in enforcing tax collection from informal traders
in Zimbabwe.
 To determine the role anti-corruption commission unit can play in the enforcement of tax collection from
informal traders in Zimbabwe.
Research Questions
Main Question
 What is the most effective framework for enforcing tax collection from informal traders in Zimbabwe?

Specific Objectives

 What are the effects of indirect taxation initiatives such as VAT in enforcing payment of tax by informal
traders?
 What is the role of formalisation incentives in enforcing tax revenue collection from informal traders in
Zimbabwe?
 How does empowering of informal traders assist in enforcing tax revenue collection from informal traders in
Zimbabwe?
 How does a dedicated a tax unit for informal traders effectively enforce tax collection from informal traders
in Zimbabwe.
 How effective is the collection of revenue through associations in enforcing tax revenue collection from
informal traders Zimbabwe?
 What role can anti-corruption commission unit can play in the enforcement of tax collection from informal
traders in Zimbabwe?
Research Proposition
Main Proposition
 A comprehensive framework has an impact on enforcement of tax revenue collection
from informal traders in Zimbabwe.
Specific Propositions

 Government must enhance indirect taxation initiatives such as VAT to effectively enforce tax collection
from informal traders.
 The use of formalization incentives will lead to effective enforcement of tax collection from informal
traders in Zimbabwe?
 The government must empower small firms to successfully enforce tax collection from informal
traders in Zimbabwe.
 A dedicated a tax unit for informal traders is required to effectively enforce tax collection from
informal traders in Zimbabwe.
 Government must collect tax revenue through associations to effectively enforce tax collection from
informal traders in Zimbabwe.
 The anti-corruption commission unit plays a critical role in enforcing collection of tax from informal
traders in Zimbabwe.
Scope and Limitation of the study
Geographical delimitation

The research will focus on informal traders in Harare. Respondents will be drawn from informal markets
such as Mupedzanhamo, Magaba, Mbare Musika, Glenview complex , Copacabana and Gulf Complex.

Population delimitation

The respondents for this study shall be owners of the various business enterprises in Harare informal
markets because the the owner is mostly involved in the day to day running of the business.

Limitations

 Research will only be conducted in Harare due to time and resource constraints.
 Due to the research occurring during COVID -19 pandemic, some interviews may need to be conducted via
Whatsapp and other digital platforms depending on the respondents comfort with face to face interviews
which may eliminate the ability to observe body language during interview.
Significance of the study
The study will contribute to an already existing academic fountain of knowledge in the
Theoretical field of informal sector taxation. This research will proffer most recent insights to
Significance
academics so guide on focus for future researches.

Findings will provide a new tax collection framework that can be used by fiscal revenue
Practical
Significance
practitioners in government particularly ZIMRA making revenue collection from
informal traders effective. The study will provide recommendations that can be used by
ZIMRA to enhance current revenue collection strategies for informal sector.

Methodological Majority of historical studies predominantly used quantitative data gathering technics
Significance such as structured questionnaires. However this study will be conducted using qualitative
tools such as unstructured and semi structured interviews.
Literature Review
Theoretical Framework
 Ability to Pay: ( Adam Smith, 1776)
The theory advocates that taxation burden should be fairly spread. The theory asserts that all traders in a country
must pay tax based on their ability (Simiyu 2013). This inclusivity approach therefore calls for segmentation by
income of tax payers.

 Socio-Political theory: (John Stuart Mill,1860)

The socio-political theory asserts that the social and political objectives should be the chief determinants in selecting
taxes in any given community (Ogbonna & Appah 2012). This implies that certain tax laws will be designed to
achieve political goals as opposed to economic agendas.

Empirical Studies
 Zinnes (2009) established a framework for formalisation of informal sector using the the Cost-benefit approach to tax
compliance which was underpinned in the legalistic view that informality is a choice.
 The study also focused on the empowerment approach which viewed informal business as having been forced into
informality due to lack of capacity or access to resources.
Literature Review cont….
Sub Themes
Main Themes
 Sub-Theme: Understanding of VAT
 Indirect Tax Payment through VAT
 Compliance to VAT payment
 Presumptive tax payment
 Understanding of presumptive tax
 Dedicated Tax division
 Corruption in tax collection
 Incentives for formalisation
 Confidence in benefits of tax payment
 Government support of informal businesses
 Poor Tax administration
 Collection of tax through Associations
 Lack of Fairness in tax administration
 Negative Perceptions on formalisation
 Lack of Government support
 Power and influence of informal trade associations
Research Methodology
Research design

 This study will follow Exploratory research because it seeks to explore strategies for the tax collection
framework for informal traders.
 Through establishment of the variables for the framework such as the indirect taxation, the exploratory
research will determine key themes that will assist to formulate the model.

Research philosophy

 The study will adopt the interpretivist research paradigm.

 This philosophy allows respondents to make sense of situations based on their individual experience and
expectations.
 Interpretivists acquire knowledge by interpreting the experiences which will help them to come up with a
framework. They believe that knowledge is contextual or relative and many different interpretations can
be attributed to the results of the study.
Research Methodology cont…
Research Methods

 The researchers will use a qualitative approach .

 This approach will help researchers to understand the human attitudes ,behavior, emotion and
personality characteristics.
 This method has been preferred by the researchers because of its flexibility.

Research Approach

 The research will use an inductive approach which is concerned with generation of new theory from
emerging data. The researchers will use research questions to narrow scope of the study.
 The approach will allow the researchers to explore new phenomena looking at previous studies from
a different perspective.
 This approach allows the researchers to conduct the study with an open mind without any
preconceived ideas on the expected outcomes.
Research Methodology cont…
Research Strategy

 The researchers will use the action research strategy because of the need of interaction between the
researchers and the respondents.
 This strategy is problem-focused and uses a step by step approach in implementation of initiatives meant to
solve the research problem.
 This is a practical problem-solving strategy that generates new data which is analysed together with actions
taken to transform the situation.

Population

 The population under study will be the informal traders in Harare.

 The sampling frame are lists of informal traders from various associations such as vendors associations, hair
dressers , transporters among others.
 The researchers will use quota sampling to classify traders according to sector thereafter convenience and
judgemental sampling which are a non-probability sampling techniques are used to select respondents in each
quota.
Research Methodology cont…
Data collection instrument

 This study will use unstructured and semi structured interviews .An interview guide with high-level questions will be
designed to cover each theme or topic.
 These instruments are ideal for the target audience as they allow informal conversations to happen.
 Semi structured interviews will also allow the interviewer to add key follow up questions.
 The researcher can get non-verbal cues which help to confirm the credibility of the in formation obtained.

Credibility issues

 The researchers will address credibility issues by conducting a pilot study before embarking on the actual study. This will
ensure that the interview guide will contain all the relevant topics and questions before commencing the actual research.
 Purposive sampling techniques such as judgemental and quota sampling will be used to select target respondents. The
researcher will use personal judgment to select population members who are good prospects for accurate information.
 Using quota sampling will allow the researcher to strengthen sample repressiveness by selecting prescribed number of
people in each of several categories such as sector and location.

Data Analysis Techniques

The data analysis will follow a thematic approach and trend analysis will be adopted as well as the use of the most
interesting quotations. The researchers will use data codes to categorise the data into main themes .
Ethical Issues and Action Plan
Ethical issues

The study will consider participants’ consent, confidentiality and anonymity and privacy.
 Researchers will obtain explicit approval from the participants before collecting data.
 Information that will be obtained will be kept with strict confidentiality to avoid any chances of information leakages.
 The researchers will guarantee participants anonymity ensuring that no one will link content of the research to any specific
person.

Action Plan
Activity Time Period
May Jun Jul Aug Sep Oct
Research Proposal

Chapter 1
Chapter 2
Chapter 3
Chapter 4

Chapter 5
KEY REFERENCES

AFRODAD. (2011). What has tax got to do with development: A critical look at Zimbabwe’s tax system. Harare, AFRODAD.

Ayee J. 2007. Building Tax Compliance through Reciprocity with Government. Paper presented at the Foreign Investment Advisory Service
(FIAS) of the World Bank Group Regional Conference, Accra, [January].

Baer K. 2003. Taxing the informal sector.

http://web.worldbank.org/wbsite/external/topics/extpublicsectorandgovernance/extpublicfinance/
exttpa/0,,contentmdk:20234805~iscurl:y~pagepk:148956~pipk:216618~thesitepk:390367,00.html [12 March 2021].

Bird RM, Wallace S. December 2003. Is it really so hard to tax the hard-to-tax? The context and role of presumptive taxes. ITP Paper 0307.

Fin Mark Trust; 2011. Available:http://finmark.org.za/finscope- consumer-survey-zimbabwe-2011/

International Monetary Fund, (2017), informal economy accounts for 65% of GDP – IMF, Retrieved on 16.03.2021 from:
https://www.businessamlive.com/nigerias-informal-economy-accounts-65-gdp- imf/

Sikwila.M.N, Kareza G and Mungadza A, 2016. Tax collection constraints and tax burden on the ubarn informal
sector Enterprises: evidence from Bulawayo Zimbabwe. Mediterranean Journal of Social Sciences,
vol.7, no. 6, November 2016

ZIMRA. Revenue Performance Report; 2011

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