Fiscalization and the Informal Economy in Zimbabwe: A Path to Formalization

Abstract: Introduction: Zimbabwe's informal economy is significant, with many businesses operating outside the formal tax net. Fiscalization policies aim to bring these businesses into the formal economy, but their effectiveness is unclear. This study examines the impact of fiscalization on informal businesses in Zimbabwe, exploring its potential as a path to formalization. Methodology: A mixed-methods approach combined survey data from 300 informal businesses with semi-structured interviews from 20 business owners and policymakers. Logistic regression analysis examined the relationship between fiscalization policies, business characteristics, and formalization. Results Analysis: Fiscalization policies significantly influence formalization, with a positive correlation between policy implementation and formalization likelihood. Retail businesses, urban locations, and older/more educated owners are more likely to formalize. Micro-sized businesses, male owners, and rural locations face barriers to formalization. Conclusion: Fiscalization policies can effectively encourage informal businesses to formalize, increasing tax revenue and economic growth. Targeted support for micro-sized businesses, male owners, and rural locations can address specific barriers to formalization. Policymakers can leverage these findings to refine fiscalization policies, promoting a more inclusive and formalized economy in Zimbabwe. By understanding the complex relationships between fiscalization, business characteristics, and formalization, Zimbabwe can unlock the potential of its informal economy and foster sustainable economic development.