THE ROLE OF TAX EDUCATION AND BUSINESS SUPPORT SERVICES IN IMPROVING TAX COMPLIANCE WITHIN THE INFORMAL SECTOR UNDER THE NEW TAX REGIME IN ZIMBABWE: A CASE OF MASVINGO

Abstract

The informal economy constitutes a dominant segment of Zimbabwe's economic landscape, yet its contribution to national tax revenue remains significantly low, presenting a critical challenge for domestic resource mobilization. This paper investigates the potential role and effectiveness of tax education and business support services as mechanisms for enhancing tax compliance among informal sector operators in Masvingo, Zimbabwe, specifically within the context of the new tax regime introduced through recent Finance Acts (2023/2024). Employing a mixed methods approach, this study qualitatively explored the experiences and perceptions of informal operators in Masvingo regarding the new tax regulations and existing support structures, while quantitatively assessing the correlation between perceived tax knowledge, access to business support, tax morale, institutional trust, perceived complexity, and reported compliance behaviour. Findings indicate low baseline tax knowledge, significant perceived complexity of the new regime, and a strong negative correlation between compliance and factors like perceived corruption and system complexity (r = -0.65, p < 0.01), alongside a positive correlation with financial literacy and access to bookkeeping support (r = 0.58, p < 0.0) and trust in tax authorities (r = 0.71, p < 0.01). Thematic analysis revealed widespread confusion, mistrust in governmental institutions, affordability concerns regarding presumptive taxes, and a critical need for practical, accessible support tailored to the informal sector's realities. The study concludes that while tax education and business support are essential for building compliance capacity, their effectiveness is severely constrained by low tax morale stemming from governance deficits, perceived unfairness, and administrative complexities. Recommendations emphasize the need for simplifying the tax regime, developing targeted and integrated education and support programs focused on practical skills and demonstrating the fiscal contract, enhancing transparency and accountability, and fostering a more supportive regulatory environment at the local level in Masvingo