Characteristics of the Informal Sector That Facilitate Inclusion in The Formal Tax System: A Case of Bulawayo SMEs Retailing, Bulawayo, Zimbabwe

The informal sector in Zimbabwe, encompassing a wide range of unregistered businesses and self-employed individuals, presents significant challenges for tax compliance due to its unique characteristics. This study investigates the attributes of the informal sector that impede tax obligations, focusing on the lack of formal registration, absence of financial records, reliance on cash transactions, and limited access to financial services. A quantitative research methodology was employed, utilizing a combination of judgmental and convenience sampling to analyze data from 29 small and medium enterprises in Harare’s Central Business District. Findings indicate that 55% of participants acknowledged the absence of formal documentation as a primary barrier to tax compliance. The study highlights the need for targeted strategies that leverage these characteristics to facilitate the informal sector's integration into the formal tax system. It recommends the development of alternative tax models and enhanced communication regarding tax benefits, aiming to foster a more inclusive tax environment that benefits both the government and informal entrepreneurs.