THE SABMiller-owned Zambia Breweries plc. that produces and distributes Coca Cola have called for fair application in ‘tax holidays’ following a Mail expose that Pepsi was given a five-year K10.8 billion tax holiday by former Finance and National Planning Minister Situmbeko Musokotwane.
It is like the age-old ‘cola’ wars all over again where the two arch-rivals try to out-do each other in sponsoring sports or coming up with new unique products except this time the ‘war’ has been brought to the Zambian soil.
Leading the attack is Zambian Breweries corporate affairs director Chibamba Kanyama who has expressed “concern” about “competition” issues in the tightly contested industry, which he feels must not apply ‘exclusively’ at the expense of possibly discriminating other companies.
He said it is important for Government to ensure that trade policies are also fair.
This was after the K10.8 billion tax holiday to Varun was exposed by the Mail on Tuesday. Dr Musokotwane instructed the Zambia Revenue Authority to award the tax holiday to the company that produces Pepsi Cola.
“We would also love to have a tax holiday, if the opportunity arises,” Mr Kanyama said, adding that Zambian Breweries has never been awarded a tax holiday on any of its products despite ‘massive’ investments it has made in Zambia.
“We haven’t had a tax holiday on VAT and excise duty. Our concern here is on competition. I think policies and programmes should apply to everybody in the industry,” he said.
He said VAT and excise duty should apply fairly to all companies in the industry to promote fair competition.
Conversely, Trade Kings Limited, a local manufacturing company, says the tax holiday incentive is open to irregularities and abuse by certain companies, especially foreign ones.
Company corporate affairs manager Bright Chunga said in a separate interview that some foreign firms have closed their companies after the expiry of the tax holiday incentive.
“I recall at some point, Government gave some furniture shops and others dealing in suits a tax holiday but most of them left after the expiry of the period. So this incentive can encourage irregularities,” he said.
Dr Chunga said since the establishment of Trade Kings in 1995, it has not received a tax holiday.
“Trade Kings has never ever been given a tax holiday since inception,” he said.
He said the investment licence is the only tax holiday which applies to every established company.
Dr Chunga said the Investment Act stipulates the types of tax holidays that apply to various investments.
“I know of a tax holiday which applies when a company invests over US$500,000. However, there is another type of holiday which is discretional. This is what the Investment Act stipulates,” Dr Chunga said.
Tax deferments are a fairly normal practice as long as a statutory instrument (SI) is signed and extenuating circumstances are provided before the tax holiday is given.
Tax experts say this is not the case for Pepsi Cola.
According to the Zambia Daily Mail it was “highly illegal” for Dr Musokotwane to defer a consumable tax such as VAT.
Minister of Home Affairs Kennedy Sakeni has since directed the police to ensure the law takes its course in the matter.
He said that his ministry is in possession of information on Dr Musokotwane’s suspected wrongdoing in respect of Varum beverages deal.
“It should be noted that the ZRA Act empowers institutions to investigate and prosecute wrongdoing and this is best done in collaboration with other law enforcement officers to do so,” Mr Sakeni said.
Brian Lingela at the Zambian Anti-Trust Unit said his commission may investigate the matter to ensure there are no ‘competition’ breaches.
[Zambia Daily Mail]