ActionAid Zambia has welcomed President Edgar Lungu’s directive to Zambia Revenue Authority to engage in dialogue with the mining companies over the Value Added Tax refunds and the new mining tax regime.
Action Aid Zambia Country Director Pamela Chisanga has however noted that the dialogue on the tax measures needs to be led by the Ministry of Finance as the policy making organ in consultation with the Ministry of Mines and Zambia Revenue Authority.
Ms Chisanga said from the work that ActionAid has undertaken, it is clear that Zambia is being reaped off by multinational companies taking advantage of the loopholes in our tax system and the mining sector is no exception.
She said the country in this regard should undertake a comprehensive review of the mining tax regime and administration as they address the challenge of the newly introduced mining tax regime.
‘ActionAid would like to reiterate our earlier calls on Government to undertake a comprehensive and transparent validation process of the VAT refund claims under dispute to ascertain (i) the validity of the claims (ii) the challenges faced by companies in obtaining documentation relevant for reclaiming VAT and (iii) justify the requirements under VAT rule No.18 regarding the conditions which should be met by exporters in order to qualify for VAT zero rating of exported goods,’ she said.
In developing the statutory instrument to regulate the payment of refunds to deal with future payments as stated by the Minister of Finance, Action Aid calls on government not to depart from the intentions of VAT rule 18 as the intention of the rule is noble and that government should re-enforce the documentation requirements in the Income Tax Act to help with information asymmetry necessary for curbing tax planning by the multinational companies.
“It is our hope that following the adoption of the Mbeki panel report on illicit financial flows, Zambia will use this as an opportunity to demonstrate its commitment to implementing the report’s recommendations as pledged by the President at the just ended AU Heads of State Summit and that Zambia will be a pioneer in putting an end to illicit financial flows from our continent.’
She added “Multinational companies regularly deprive Zambia of vital money that could be used for much needed public services such as education and health.”
In a statement issued by the Special Assistant to the President, Mr Amos Chanda, the President has called for an amicable settlement that results in a win-win situation for both the country and mining companies. This calls for transparency and accountability on the part of the mining companies and strengthening of monitoring mechanisms on the part of government to avoid over reliance on mining companies for critical information such as production figures.
With regards to VAT refunds, “the Head of State has directed that in the light of the existing legal dilemma regarding claims that have already been submitted, new negotiations must therefore be opened to address mechanisms under which any payment would be settled” Amos Chanda