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Sales Tax Consultations with Business Community

Speech delivered by Mr Fredson K. Yamba, Secretary to the Treasury
On behalf of the Hon. Margaret D. Mwanakatwe, MP
Tuesday, 21 May 2019

  • The Provincial Permanent Secretary
  • Senior Government Officials Present
  • Commissioner for Direct Taxes – Zambia Revenue Authority
  • Senior Officials from Zambia Revenue Authority
  • Members of the Business Community
  • Invited Distinguished Guests
  • May I Simply Say, All Protocols Observed

I am delighted to join you today at this consultative meeting on Sales Tax in Kabwe.

Ladies and Gentlemen, in the 2019 Budget Address it was announced that Government was proposing to abolish the Value Added Tax (VAT) and to replace it with a simpler, Non-Refundable Sales Tax. Subsequently, approval was granted by Cabinet and the Sales Tax Bill was presented to Parliament on 2nd April, 2019.

The decision by Government to abolish Value Added Tax and replace it with Sales Tax is necessary to stop the refund debt escalation, create fiscal space, pay the outstanding vat refunds, and more importantly increase revenue collection to support government’s social development programmes.

As you may be aware, following Zambia’s ascendance to lower middle-income country status, fiscal support from our Cooperating Partners has been reducing. Therefore, there is need to review the domestic revenue mobilisation strategies in order to sustain our development agenda and reduce poverty.
Since October 2018, Government has been having internal consultations with different ministries and agencies to design the framework within which the proposed sales tax will be implemented.

Now that the framework has been developed, we are widening our consultations to get valuable input from other key stakeholders, mainly from the business community. It is for this reason that we are here today in Kabwe, Central Province to engage with you on this important matter in order to hear how best we can implement the Sales Tax in a manner that will be beneficial to both taxpayers and the Government.

In order to support the local industry, a differentiated sales tax rate has been adopted at 16 percent on imported finished products and 9 percent on locally manufactured products. Furthermore, exports will be exempt from the sales tax in order to make them competitive and earn the country foreign exchange.

As a way of addressing the effects of tax cascading associated with sales tax, exemptions have been provided on capital goods, basic food items and essential goods and services in sectors such as health, education, agriculture and water.

Exemptions on selected inputs used for production in priority sectors identified in the Seventh National Development Plan as agriculture, manufacturing, mining and tourism have also been provided to ensure that the cost of production is contained.

Ladies and Gentlemen, given the exemptions provided under Sales Tax, it is expected that production costs will remain relatively unchanged. It is, therefore, expected that the Sales Tax will only increase prices to the extent of the number of distribution points in the production value chain.

As a business community, you may be wondering what will happen to your outstanding VAT claims after the implementation of Sales Tax. I want to assure you that Government will pay off all outstanding legitimate VAT refunds. Reconciliations will be done to close off VAT and a plan will be put in place of how to liquidate the verified refunds.

Ladies and Gentlemen, I note that our domestic tax system is largely based on self-assessment. It is, therefore, important that our taxpayers are provided with updated tax information to enable them to know their tax obligations. This will make it easier for them to be tax compliant.

As the Ministry of Finance, we are excited because a forum like this one provides an opportunity to clarify matters pertaining to the sales tax. I am also hopeful that this meeting will result in fruitful engagement between the policy-makers, the business community and the tax authority.

Ladies and Gentlemen, I want to thank you the business community for being cooperative and patient during the policy development process, so far. This being a consultative meeting, I urge you all to be open minded and meaningfully contribute to the discussions.

With these few remarks, it is my singular honour and privilege to declare this sales tax consultative meeting officially open.
I thank you, and God bless you all