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THE formalisation of the economy, especially when it comes to registering businesses and paying taxes, is needed to grow the smallest of small businesses and to ensure that everyone who is eligible pays their share of the necessary tax load instead of leaving it to a few.

Parliament is now becoming involved in both the plan for formalisation and the implementation of the strategy, and at this stage the more input and the more debate on the subject the better.

While everyone agrees with formalisation, converting an assortment of vendors, hawkers, informal miners, informal service providers and others into proper businesses, the problem in the past has been with formalisation.

The digitisation of ever more records, registration processes and the like now allows practical implementation. The administrative costs for registering a business sink to very low levels when everything can be done by connecting to a database, either in a booth at a tax or business affairs office or even online, perhaps even doing this with a smart phone.

Certain conditions must be met. For a start the process needs to be simple. Most micro and small businesses are not complicated and there should be no need for a long complex form when these are recorded and registered. 

This allows a lot of those running such businesses to be able to go through a simple form themselves, without a battery of advisors or even someone from the tax office looking over their shoulder.

So far as tax is concerned, most people at the starting end of their business careers operate as sole traders, that is without incorporating their business, and without bothering the Registrar of companies. They pay tax as an individual on the profits of their business, and again it is unlikely that many in the early stages will pay anything with the first $100 000 a month tax free, followed by the bands for low rates.

Where they need to act to operate in the formal sense is a basic set of accounts, and here the tax office and others in authority need to lay down some simple standards and an outline of the desired accounts.

There are besides the commercial accounting systems some excellent products that can be downloaded for free, produced by the sort of groups that believe in open source systems and are willing to produce some fairly complex products that come with easy to understand operating instructions, and so can be used by those without book-keeping education.

Again, both with the Government ministry responsible for small enterprises and among the several organisations that want to help small businesses in practical ways, it should be possible to create a sort of standard business model using this open source software.

It is also prudent to have places where people running the smallest businesses can come and spend the necessary hour or less a week converting what is in their notebook into their business accounts on someone’s computer.

It should be possible with this model in Zimbabwe to also factor in the Zimbabwean tax code, so that as the business person punches in the costs and the revenue, the system automatically produces the accounts and the tax that needs to be paid. 

This can be complicated if someone has to work everything out, but simple if the basic model is available and can be used by the owners of these small businesses.

Big companies hire qualified accounting staff and most have a set of digital accounts on a major commercial system. 

The small business person cannot hire the bookkeeping staff, let alone the expensive accounting staff, but still needs to record the basic details of their business and work out what they need to pay.

There were, at one stage in the days of manual bookkeeping, a number of bookkeepers who set up the small traders with the basic record keeping and once a month these would visit their bookkeeper, hand over the shoe box of receipts, the basic invoice book, and what amounted to a journal. 

A couple of hours later, at very modest cost, they had a set of monthly accounts that would pass the tax department.

This is the sort of thing that is now needed in electronic form, along with access at the most basic level to a computer for a couple of hours a month, or a few minutes each day. 

Zimra is being helpful and a lot of registration and the like can be done on line, with Zimra also interested in having the booths handy. 

After all Zimra does not want to spend $1 000 in man-hours to collect $100 in tax.

But this system is not as simple as it could be, especially when a person has multiple sources of income, pays some PAYE, has some tax deducted when doing work for a formal business and collects all sort of other bits and pieces. 

This is why it is so important for those who truly want to be helpful in implementing formalisation programmes to ensure that the businesses they want to formalise can have an understandable system where they basically have to do little else than punch in their numbers and keep a very simple set of books, with everything worked out for them.

A lot of the progress in any sort of business growth will come when the theory and the desire is turned into practice, so the pressure for simplifying the legal systems, especially at the bottom end of the business ladder, is justified and needs to be implemented first.

There is no reason to assume a small one-person business needs to have to go through the same processes as a complex corporation. But a lot of our law is there to cope with the complex corporations, and rightly so. But it should be possible to extract the basic requirements for those at the bottom of the ladder, so they see the benefits of formalisation and are not scared away.

Of course for some the day comes when they move up the ladder and start needing more complex accounts than a small cash-only little business needs, and start needing their tills to calculate their VAT and start needing to hire qualified accounting staff, to join the far larger group of production and sales staff. Then they have arrived.

But while they are setting off they cannot afford all that, and do not need all that, so it is important that the necessary legal and practical measures have been put in place.