Many of you who follow our articles will know we always recommend lucrative areas for business and entrepreneurship. One of the recurrent trends you might have noticed is that of digital products and services. The pandemic has over the past 2 years surged the demand for and use of digital products or services in Zimbabwe. This has been borne out of more people spending more time online due to lockdowns. Some of the digital products or services in question are e-commerce, digital marketing, content creation, and cloud computing. Well, it turns out the government caught on regarding the prospects of such areas. As such they have decided to now tax companies operating in those areas and more.

Latest Government Gazette – Published 19th January 2022

Public-Private Partnership Agreement between the Republic of Zimbabwe and Daedalus World Limited

The notice read as follows:

“It is hereby notified, in terms of section 46 of the Zimbabwe Investment and Development Act [Chapter 14:38], that on the 17th of October, 2021, the Republic of Zimbabwe entered into a public-private partnership agreement with Daedalus World Limited of Tortola, British Virgins Islands, in terms of which Daedalus World Limited will assist the Republic of Zimbabwe by providing a revenue collection service through taxing qualifying companies that provide digital advertising, content, cloud computing, e-commerce, gambling, betting, gaming, and cryptocurrency services to persons and organizations within the Republic of Zimbabwe.

The said Agreement was duly approved by Cabinet on the 23rd of November, 2021, in terms of Section 35 as read with the Fourth Schedule Part II under paragraph 7(1) of the Zimbabwe Investment and Development Act [Chapter 14:38] and is therefore valid and binding in accordance with its terms.”

HON. JENFAN MUSWERE, M.P.,

Minister of Information Communication Technology, Postal and Courier Services

Some Thoughts To Muse On

There is no question about how widely active the aforementioned areas now are in Zimbabwe. I am talking about:

  • Digital Advertising
  • Content
  • Cloud Computing
  • E-commerce
  • Gambling
  • Betting
  • Gaming
  • Cryptocurrency

It is somewhat ironic that the government’s first keen focus is taxation. Yet there has not been much in terms of facilitating or providing support to startups in these spaces. A good quick example here is cryptocurrency. The government has been heavily opposed to cryptocurrencies – evidenced by the lack of any friendly policies so far. It then baffles the mind why they are contemplating taxing cryptocurrencies companies. It in itself is a contradiction and a huge impediment. Lack of friendly policies and now taxation constitute two hurdles that can slow down the uptake of cryptocurrencies in Zimbabwe.

In the long run taxation for digital products or services is not necessarily a bad thing but I feel now it is too early. The thought of taxation can be counterproductive to many aspiring entrepreneurs out there. Most companies operating in those spaces are still finding their footing. Digital products or services are not that easy to push in Zimbabwe. Zimbabweans are still gradually warming up to such products and services. Taxation can somehow cripple budding companies before they properly settle down.

Another topical issue that people have been talking about is Daedalus World Limited. It is understandable, to some extent, that this is new and technical territory. However, it seems distasteful to contract a foreign company to assist in revenue collection. Can we say that there are no local Zimbabwean technocrats to assist in this regard? This ultimately raises questions about the integrity of this whole taxation exercise. I might not have the details regarding why Daedalus World Limited was chosen but what I know is people are wondering why.

At the end of the day, it is abundantly clear the government of Zimbabwe is widening its revenue collection net. It is highly disconcerting for many though since it is a sign of fundamental economic challenges. We wait to see what the specific laws regarding this new taxation regime will be like. You never know, it might not be as bad as it initially seems. Despite the looming taxation of digital products or services, I still recommend you start businesses or startups in that space. The times we are living in and moving towards will perpetually incline us towards digitization so be unfazed by the tax.