Zambia scraps Value Added Tax system, introduces new one: Details

The revenue collection agency in Zambia said on May 6 that payment of refunds under the Value Added Tax (VAT) system has been a drain on the national treasury hence the government's decision to replace it.

The government of Zambia has scrapped the VAT and introduced a new tax system, the sales tax, although the decision has received resistance from stakeholders, saying it will kill industries. Stakeholders believe that the proposed nine percent sales tax on locally produced goods and 16 percent on imported products was too high. The stakeholders have also complained that the government has not explained how the tax will be implemented.

But the Commissioner-General of the Zambia Revenue Authority, Kingsley Chanda opined that the government has been losing a lot of money through VAT refunds, according to state broadcaster, the Zambia National Broadcasting Corporation.

He said during a discussion forum on the sales tax that the government has been paying about 1.4 billion Zambian Kwacha (about 110 million U.S dollars) per month in refunds to companies and that the tax system also promoted frauds in business where firms were under-declaring goods and over-valuation of goods to demand huge refunds.

Some firms, he said, were demanding double refund on the same certificates, resulting in a drain on the treasury. According to him, the introduction of the sales tax will help remedy some of the challenges, adding that every tax law was meant to contribute to the revenue collection and not work as a cost on the part of the government, as reported by Lusaka Times.

Last week, Finance Minister Margaret Mwanakatwe said the VAT system was not working for the country and that she loses sleep whenever it was time to pay companies refunds. The new law is expected to come into effect on July 1, 2019.

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