A major element of disquiet among economists is just how big the informal sector is in Zimbabwe, and in particular the pure cash part of that sector, and a major bone of contention among licensed businesses is how much tax is avoided by those in that sector, so putting the burden on the formal sector and its employees who are seen as carrying far more than their fair share.
The informal sector divides into two. On one side is the more formalised portion, largely the small-scale farmers and some of the artisanal miners.
These are largely paid through bank accounts, or at least have their gold sales recorded, and so their earnings are known.
Most do not pay income tax, in fact probably almost all, since their annual profits are below the threshold where income tax cuts in.
Few keep complete business accounts, so while the authorities know their total revenue, or at least can find out, there is not a full record of deductible expenses and so the profit that could be susceptible to income tax is unknown to any degree of accuracy.
It was long assumed, probably correctly, that these groups never earned enough profit to even start entering the 20 percent tax bracket, but these days this might no longer be the case.
A fair number of small-scale tobacco farmers have been spending more money, buying cars for example, which suggests that several might now be expected to present income tax returns and even start paying income tax.
Artisanal gold miners, assuming they are selling through Fidelity as they are legally obliged to, have to pay a royalty, although this is considerably lower than the royalty charged the mining companies, so at the very least they are starting to contribute to the Zimra revenue.
As with most mining operations, large or small, income tax and company tax on these businesses is relatively easy to avoid once all possible deductions are made, which is why royalties were reintroduced in the first place.
Because these two groups are paid through bank accounts, they are also subject to the two percent tax on transactions, so a bit more of their money goes on tax and that tax probably makes up the bulk of what the State gets off the farmers.
They will also pay VAT indirectly when they buy anything from their bank accounts since those payments cannot be submerged into the pure-cash economy and so at some stage their suppliers will be handing over the VAT.
There are several presumptive taxes that some have to pay, such as hairdressers, if Zimra can actually track them down as most will not be lining up to pay unless they come under pressure.
Vendors, or market-stall operators, in formalised markets are supposed to pay US$1 or its equivalent every day, this to be collected by the market owner or operator.
Again the tax is collectable since the markets can be tracked down, even if the tax is included in the stall rent as it probably is. But the stall owner still can be found and made to pay.
But we are now starting to move into the realms of ever more widespread tax avoidance.
Hairdressers, for example, operating from home, or those who wander from client to client, almost certainly can avoid detection and so do not pay.
And many will be cash only, so no one can even start estimating what the earn and what their profits are.
There are others, besides the untaxed and illegal pavement vendors, who pay zero in tax and who are solid US dollar cash.
They also pay no licence fees to a local authority. It is highly unlikely that they come even close to exhausting the zero-tax bracket when it comes to earnings as a sole trader, but the possibility for a few does exist.
None pay VAT on that final retail stage, but the value added up to supply or raw materials, import or even manufacture is collected, and that will be the bulk of the value added.
So the loss of VAT on the final retail stage is irritating but not a disaster. But there will be no two percent because there are no bank accounts and so no bank transfers.
Trying to capture some tax from this group, as well as from large businesses that manage to operate in a pure car basis such as a reasonable percentage of tuck tops, seems to be almost impossible, at least in practical terms.
It does not make any sense to spend more than that the tax brings in to collect that tax, hence the need for presumptive taxes at the lowest level, or some sort of standard small fee that can be cheaply collected. We are now down to practical measures, which may not necessarily be fair.
Of course, if we could avoid a cash economy entirely or almost entirely then a lot more possibilities open up. To a degree were already there when it comes to local currency.
The refusal of the Reserve Bank of Zimbabwe to build up the cash banknotes to more than Z$100, the equivalent of around US1,6 cents, means that cash is no longer an option for local currency transactions. They have to be in digital format.
However, it is easy to use US dollar bank notes and it is easy to acquire these. A lot come from diaspora funds, and people who get these can just go through Western Union or the other sources and collect the banknotes.
It is also possible for those who have made their revenue in US dollars, such as for some of their crops or all their gold pieces, to use an ATM to get their US dollar banknotes and then use that cash far away from Zimra or anyone who wants to know what happened after the banknotes were collected.
Banning the use of banknotes is quite possible in the modern era, but any attempt to ban US dollar banknotes would likely to cause major opposition and would be almost impossible to enforcement in a democracy. It was possible in the days of Ian Smith, but then he was no democrat.
No one really knows in detail how much cash is actually stuck in boxes or wallets, but it appears to be a lot, with many people and even many legal businesses holding their savings in banknotes, rather than in more safe bank accounts.
There are even quite a lot of local currency bank account holdings converted into US dollar banknotes away from the banks.
A lot of people who have moved their money out of bank accounts, in either US dollars directly or in converting from local currency into US dollars, are now free of all sort of business potential taxes and their money simply disappears from taxes on revenue. They no longer pay any tax or at least any more tax.
The actual size of this underground cash-only economy is unknown. Those involved do not think about it much but believe it is a small percentage of the economy when they think about it.
Those who have to operate through bank accounts and pay taxes believe it is a huge slice of the economy and that a lot of people are forcing the Government bills to being paid by a small fraction of the population.
Starting from 2015 ZimStat is starting a two-years survey of the entire economy collecting all economic data, a sort of economic census, so that there is a starting point that is based on counting, not on estimates.
This seems essential but there is still a problem in that count, since a lot of those involved at not going to be that enthusiastic about giving data to ZimStat, so the agency will be have to be working from the original sources of diaspora funds, imports, what manufacturers are selling to informal traders, what artisanal miners are actually mining and selling, with the gap counted in, and what those who grow crops and vegetables are selling.
This appears to be while two years will be needed, with a year for the preparations, to find all the data.
Once the full data is collected, then it should be a lot easier to update data and keep values accurate, but the problem will remain in getting the full extent of the data to begin with.
Almost all households in Zimbabwe earn a living in some way. Zimbabwe is not a welfare state and while emergency food relief can be will be distributed, it is generally accepted that households have to earn their own income.
We also have most households with multiple sources of income. So you have a teacher who grows vegetables and harvests chickens, who runs some trading on the side, and has the odd extra deal in progress.
They pay PAYE on their salary, but the rest of their income might well be tax free, although the profits from these other activities might well be in the 30 percent tax bracket after their teacher’s salary.
The ZimStat count should finally record just how big the total economy is, and who is involved and to what extent, which is why it needs to be more of a census-type count rather than sector estimates that we have been relying on.