In a statement on his organization’s budget expectations, EFZ Chairperson Johnstone Chikwanda said the country has been losing huge sums of money through false declarations by fuel marketers who claim to be in transit to Congo DR then divert the commodity to within the country once they pass the boarder point.
Dr Chikwanda explained that the gravity of false transit fuel declarations cannot be underestimated especially in transit countries where fuel price taxation is relatively high such as Zambia and that evading such a huge tax burden results in abnormal profit margins for the perpetrators and partial loss of business for law abiding corporate entities.
“By virtue of its unique geographic location, Zambia is a major transit corridor for fuel from different countries destined for the Democratic Republic of Congo (DRC) whose population is estimated to be 72 million. Statistics indicate that the Eastern part of the DRC including Katanga Province consume almost the same volume of fuel as Zambia. The bulk of this volume is transported from Tanzania, Mozambique and South Africa. This situation has been like this for decades and is unlikely to change in the foreseeable future.
“The formal fuel business sub-sector co-exists with a booming informal fuel business sub-sector. Malfeasance fuel business include making false declaration to Zambia Revenue Authority (ZRA) border control that the fuel is “transit fuel” when in actual dimension it is meant for sale in Zambia. Once the fuel tanker is released at the border, the fuel is illegally diverted and off loaded in Zambia. This false declaration causes ZRA to lose tax revenue on that fuel parcel including 16% VAT, 25% import duty and other levies. In a nut shell, ZRA loses more than 40% tax revenue with each false transit fuel declaration.
“The gravity of false transit fuel declarations cannot be underestimated especially in transit countries where fuel price taxation is relatively high such as Zambia. Evading such a huge tax burden results in abnormal profit margins for the perpetrators and partial loss of business for law abiding corporate entities on account of uncompetitive price especially in the commercial sector. Reduced business for law abiding corporate entities lead to a further loss of tax revenue due to reduced corporate tax payout,” he explained.
He further explained that the challenge can be best understood if one examined the the volume of transit fuel declarations main entry points and compare it with the volume of fuel consumption in Katanga Province where it purported to be destined.
“To gain an understanding of the gigantic proportion of illegal fuel business in Zambia, one ought to examine the volume of transit fuel declarations at Zambia’s main points of entry and compare with the volume of fuel consumption in Katanga Province. The other form of malfeasance fuel business is the buying of kerosene which has little or no taxes and mixing it with diesel in ratios of up to 40% so that they can increase the volume of highly taxed diesel. When diesel is adulterated with kerosene by as high as 40%, ZRA loses tax revenue based because tax on diesel is higher than that on kerosene,” he said.
He said curbing the informal fuel business will not only assist with optimising revenue collections but that it would also help in ensuring that the country has safe fuel for motorists and protect the business interest of law abiding oil marketing companies.
“Because of the existence of a robust informal fuel sub-sector, many countries including South Africa, Tanzania, Kenya, Ghana, Brazil and the USA have very sophisticated mechanisms in place in order to forestall or reduce the malfeasance of fuel adulteration and diversion of untaxed transit fuel beyond the efforts of the revenue authorities in those countries.The informal fuel business sub-sector is so huge that curbing its existence can greatly assist with optimising revenue collections, safe fuel for motorists and protecting the business interests for law abiding oil marketing companies.
“To this end, the forum wishes to call upon the Minister of Finance to engage with his counterpart at the Ministry of Energy to examine various readily available instruments which can assist him to increase revenue collection from the fuel sub-sector for the 2017 National Budget and beyond. This booming informal fuel business in Zambia has been going on for a very long time and appears to have signed a permanent co-existence facility with the formal fuel business,” he said.
Start with scrutinizing the East African fuel operators in Zambia that are choking our fuel sector.
They have the biggest cartels.
They orchestrate the fuel diversion right from the ports in their countries (Dar & Beira) by declaration it as export fuel (in transit) hence received in bond at the ports. Then using their local subsidiaries, they offload the fuel in their Zambian bonded depots as transit fuel. And it is from these depots that their locally registered tanker fleets then distribute to local users instead of onward export to DRC.
There’s a corporate cartel involving East African fuel merchants. It is common knowledge to players in the zambian fuel industry.
@ Patriot
Everything you say can ONLY be done with full co-operation of local Customs Authorities. When was last time that ranking Custom Officer was prosecuted in Zambia?
Nigerian Prophet Sees Lungu Ruling Till 2026
Hahahahahahah! This is an opportunity to make money, if someone can find a cheaper source of fuel than where the dull PF government is getting,,,,,, let people like GBM and HH do business
So much tax on an essential commodity? Guess thats one reason why our fuel is so darn expensive!
Why tax fuel so highly and then PF supposedly subsidises it again? Something stinks here. Can this NGO explain this confounding situation?
If indeed there was “false transit fuel declarations”, there would not be any fuel shortages. Maybe 100% of this fuel goes to it’s intended destinations. What about companies owned by Mr Lungu and other ministers, how much do they pay in tax?
@Housefly this is a serious matter of economic sabotage. The companies that do this sort of thing are known I am sure . Rumours circulate in the industry that companies of East Africa origin are in this game. There could be truth in what is being said. At some point some other company had a brush with some regulatory authority over dirty fuel. It is in the public domain. It is rumoured that the game has been going on for years and some people within ZRA are allegedly part of this scheme. If ZRA were to collect these taxes salaries for civil servants would be paid on tim
The ZRA office, that the OP and DEC needs to work on is Kasumbalesa. If RIT declarations are made at either Chirundu or Nakonde the exit border is Kasumbalesa. Let us look at the acquittal process at Kasumbalesa. And are the trucks arriving there with water or fuel or some other substance … this is simple but needs to be done to stop this sabotage. The way we have controlled maize exports we can also control RITs for fuel tankers. It does not make sense to have RIBs for fuel if they are being abused cancel them.From rumours we hear a lot of fuel is dumped in Zambia and some of these OMCs sell fuel at un realistically low prices when all has been taken into account. Even DRC customs can help us control or to stamp out this illegal and evil practice.
Lol , some ill informed “patriots” are already pointing accusing fingers at East Africans .Fyi , the fuel company Kenol/Kobil is from Kenya so their homeport is not in Beira or Dar
Tanzania and Mozambique are also in East Africa… (Mt. Meru, e.t.c.?)
The roots of xenophobia are always to blame the outsiders. The truth is that Zambians are part of this scam – at ERB, ZRA, oil companies, transport companies etc. Foreigners get protection from their Zambian cohorts. Find out the Zambians who are doing this and the problem will be sorted out.
We are still waiting to hear exactly what happened to the Saudi Arabia oil deal. Huge sums of taxpayers money were spent on that trip. We want honest answers. Accountability and transparency is what constitute good governance. Someone somewhere must be reaping big kickbacks and huge commissions from these oil deals.
“….Accountability and transparency is what constitute good governance…”
Ha somethings are foreign to this PF GRZ.
those trips were cartels for elections dununa reverse and not fuel….
how come they’re not talking about Saudi Arabia now..
ba kambwila… where is fuel for 5kwacha?
If you use Stalinist methods you can increase your fuel and ring-fence it so consumers have no choice. However, in today’s world demand and supply plus communication has spawned initiative and innovation beyond anyone’s wildest dreams. Consumers will continue mitigating their costs whenever and wherever they find an opportunity or a loophole – or both. Work on studying different models of price costs so you do not push consumers further into illegality as you recklessly clampdown.
Are there no Zambian companies that can supply crude oil & processed fuel to Zambia? Are we so behind in business acumen that there’s no one capable to execute a supply chain from middle east to Ndola?
Why are Somalis from a war torn country & having no formal education still dominating the transporting of fuel?
Why are Kenyans being given lucrative crude oil supply tenders?
Why are locals not being fostered to take this lucrative business?
Why do have to wait for chinese, RSA’s Glencore to come & pick up copper for us?
As long as we have mediocre in Govt this will never be implemented. They say the rotting of a fish starts from the head
Correct. As long as you are saddled with a long-fingered clueless and corrupt govt Zambia’s doomed.
You are very right…As long as we continue with theories on the blogs, we never do such businesses.
The simple answer is that any Zambian who is allowed to accumulate significant capital is a potential future political opponent. This is true everywhere in the world, from Trump in US, to Thaksin Shinwatra in Thailand, Berlusconi in Italy, HH in Zambia etc. Economic power soon wants political power. The only solution for PF is to keep Zambians poor so that you do not have too many HHs and GBMs who can craft a credible grab for power.
YOU are right bro. We are lazy as a country because of leadership. If only our president can focus his eyes on the ball, he can score but unfortunately these people are typical african leaders, milking the poor without care. We suffer because of leadership, not able to give an enabling environment for people to prosper. Laws are there but these in leadership are not accountable as a result, laws are over looked by 99% of the population. We are doomed!!!
I DO NOT NORMALY AGREE WITH TRUMP S SAYINGS BUT WHEN HE SAID AFRICA NEEDS TO BE RECOLONISED I AGREED BECAUSE HE EXPLAINED THAT AFRICAN LEADERS ARE THERE TO IMPROVE THEIR BANK ACCOUNTS AT THE COST OF THE PEOPLE AND THE COUNTRY.
International collaboration is necessary to dismantle the cartel of organized criminals. Interpol is a key player followed by any landlocked country with a high level of economic development, such as Germany. At the same time, there is need to raise transit levy to a point that would increase revenue collection for ZRA. In addition, developing new oil refinery facilities would eliminate unnecessary scarcity as scarcity leads to super profits for the illegal players.
Which German is landlocked? Come on people why comment just for the sake of talking. As for development in US and the West just know that citizens of these countries worked very hard not politicking like you blacks do.
”This situation has been like this for decades and is unlikely to change in the foreseeable future”. THIS IS THE SAD PART OF ZAMBIA. You know how to solve the problem but you do nothing about it!. I bet if these taxes were collected, you would be able to build one new University each year. These are losses from higher level crookedness. How about the widespread issuing of fake fuel receipts at filling stations by attendants, which artificially increases the cost of transport services in the country.
Now someone responsible must act or we will assume that they are part of the cartel. If they are part of the cartel then they should be dismissed and charged for fraud.
Germany is NOT landlocked country and Interpol is NOT investigating Authority.
You are “Dr.” in what? Same like “Dr.” Kambwili? All mouth and no brain?
ZRA NEEDS TO NETWORK BETWEEN BORDERS. WE ARE LIVING IN THE ICT ERA. COMPUTER WILL TELL YOU IF A FUEL TANKER WHICH HAS BEEN CLEARED TO ENTER THE COUNTRY FOR TRANSIT HAS INDEED EXITED THE COUNTRY FOR DRC. SIMPLE AND STRAIGHT FORWARD. IF NOT, THEN THE TANKER NEEDS TO BE IMPOUNDED AND THE OWNER PUT TO TASK.
I am very suspicious about this busy body…me thinks this is a PF lobby group!!
It’s a PF NGO. He was very keen to tear down HH’s comments on subsidies claiming that subsidies were not that high. However, after the 40% petrol increase he has not even raised a whimper in protest.
No wonder fuel is expensive in zambia. Tax above 40%. And no wonder our neighbours are enjoying cheaper fuel
40% taxes and supposedly 40% subsidies removed! Surely fuel prices are supposed to be low then.
You wonder why KK had to control everything by himself? Of course this is not good for business, but if people become unruly, it’s the best alternative.
A worthwhile recommendation rather than have a team of ZRA officials camped and drinking coffee pursuing POST Newspapers while the REAL REVENUE slips under the nose of Berlin Msiska.
What I don’t understand is why go to the Saudis who own their resource to do a deal. The transport costs alone to get to Zambia means you won’t see that K5 you were promised. We actually have toxic fuel in Zambia as published by the report done by Public Eye. We have countries who are a lot closer to do deals with ie Angola for one
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Why are you guys picking on foreigners? Are you PF people want to start another xenophobia like you did the last time? Your PF is involved in this whole scheme of things and you SONTA pali foreigner? What a shame . . . .
Truth
I fully agree with u. The moment a transit entry is entered, it must be captured at the declared exit point. That entry must stay in the system until the truck has been through the exit point. The problem is that we are dealing with corrupt officials, who are most likely declaring fictitious exits. Otherwise the whole process should not be rocket science. This Chikwanda guy is dull, is he telling us that all the fuel in Katanga comes through Kasumbalesa?
No sense can come out of PF, a party for drunkards, loud mouths and dimwits.
Why is Zambia with an overabundance of Solar energy, not exploiting this, we have an abundance of trainable engineers as well as willingness to engage from countries like China.