As part of its 2018 National Budget Recommendations, the Zambia Institute of Chartered Accountants (ZICA) is calling on the Ministry of Finance to consider granting tax relief to Zambian employees through reduction in Pay As You Earn (PAYE) tax rates and widening the tax bands for purposes of taxing income for salaried workers.
The accountancy body has observed that Zambia’s salaried employees are presently the highest taxed persons in comparison to other countries in the region. Statistics also show that Zambian workers have been the highest contributor to the national treasury averaging at about 25% of the total tax revenue in the last three years compared to 7% contribution by corporate entities in income taxes.
A comparison of effective PAYE rates among African countries shows that Zambia ranks highly at 34% for Annual income of $50,000. The Institute further established that an individual employee with a monthly salary of US$3,000 would bear a PAYE tax burden of close to $1,000 in Zambia whereas their counterparts in Kenya will pay around $420, close to $340 in Ghana and around $575 in Botswana.
These statistics, reveal the fact that the current PAYE system creates a disconnect with the economic objective of empowering this category of citizens as their disposable income is adversely affected. The current PAYE regime also negates the Seventh National Development Plan theme of “Accelerating development efforts towards the Vision 2030 without leaving anyone behind”
ZICA notes that the key deliverable of poverty and vulnerability reduction as well as reduced developmental inequalities may not be achieved if workers are continuously subjected to high taxes.
“There is need for a tax system that grants relief to this category of tax payers while at same allowing the wealthy to pay a little more, therefore we propose a reduction of the top tier PAYE tax rate from 37.5% to 35%. We are also proposing widening of lower tax bands to reduce the crushing tax burden on workers. The PAYE tax brackets have not been reviewed in a long time thereby placing a strain on individuals on payroll,” says ZICA’s Technical and Standards manager Bruce Mwewa.
He explains that reducing the top tier PAYE tax rate and widening of PAYE tax brackets would give reprieve to salaried taxpayers who are already subjected to other tax obligations in form VAT on consumption and withholding tax for those in rented housing. This would further lead to increased savings, thus stimulating economic activities.
Mwewa believes that the tax relief will create a strong middle class which is a prerequisite for economic growth. With sufficient disposable income, the middle-class consumers would generate the necessary demand for goods and services produced by the economy. In this regard, the institute holds the view that the middle-class consumer creates the business opportunities to spur investment.
ZICA further observes that the amount of allowable monthly pension deduction has been static at K255 for a number of years, hence its value has been eroded by inflation. The Institute therefore appeals to government to consider pegging this amount to the maximum ceiling for NAPSA contributions.
“Increasing the pension thresholds would mobilize savings for infrastructure development and ensure that the ageing population would have sufficient funds at retirement,” avers Mwewa, adding that government needs to consider an enabling environment that allows this category of salaried taxpayers to get some relief on tax from mortgage interest as this relief would encourage uptake for home ownership.
The National Treasury, through the office of the Minister of Finance is expected to present the 2018 Budget to Parliament on September 29.
As seen below from the effective PAYE rates across Africa and the benchmarking with other PAYE regimes in other countries, Zambian employees are the highest taxed.
| Member state | Annual income of $1,200 | Annual income of $10,000 | Annual income of $50,000 |
|---|---|---|---|
| Angola | 0% | 9% | 15% |
| Botswana | 0% | 12.50% | 25% |
| Republic of Congo | 0.70% | 15% | 24% |
| Ghana | 3% | 16% | 23% |
| Kenya | 0% | 22% | 28% |
| Malawi | 30% | 30% | 30% |
| Mauritius* | 15% | 15% | 15% |
| Mozambique | 0% | 13% | 27% |
| Nigeria | 2% | 12% | 18% |
| South Africa | 0% | 18% | 30% |
| Swaziland | 0% | 25% | 33% |
| Tanzania | 2% | 24% | 29% |
| Uganda | 4% | 27% | 33% |
| Zambia | 0% | 18% | 34% |
| Zimbabwe | 0% | 13% | 24% |
Bench marking with other countries
| Zambia PAYE Regime | Rate | |
|---|---|---|
| Income Band | ||
| $0 – $367.00 | 0% | |
| $367.01 – $456 | 25% | |
| $456.01 – $689 | 30% | |
| Above $689 | 37.50% | |
| Kenya PAYE Regime | Rate | |
| Income Band | ||
| $0 – 1,207 | 10% | |
| $1,208 – 2,345 | 15% | |
| $2,346 – 3,483 | 20% | |
| $3,484 – 4,620 | 25% | |
| $4,621 and above | 30% | |
| Ghana PAYE Regime | Rate | |
| $0-412 | 0% | |
| $413 – $618 | 5% | |
| $619 – $905 | 10% | |
| $906 – 8,237 | 18% | |
| $8,237 and above | 25% | |
| Nigeria PAYE Regime | Rate | |
| $0-1,500 | 7% | |
| $1,501 – $3,000 | 11% | |
| $3,001 – $5,500 | 15% | |
| $5,501 – $8,000 | 19% | |
| $8,001 – $16,000 | 21% | |
| $16,000 and above | 24% | |
| South Africa PAYE Regime | Rate | |
| $ 0- 11,824 | 18% | |
| $11,824- $18,467 | 26% | |
| $18,468 – $25,558 | 31% | |
| $25,559- $35,757 | 36% | |
| $35,758 – 45,585 | 39% | |
| $45,585 and above | 41% |
This is a very welcome proposal from ZICA. Workers need some relief. They have been tightening their belts for a long time. You get your salary and at 35% you are just sharing your salary with the government. How do you spur development when you are just grabbing some ones salary. All the successive governments have been robbing workers.
Does anybody here really think the MoF and govt. don’t know what happens in other countries in terms of taxes and other matters? GRZ is simply not in the business of giving its citizens the best of all things!
So when HH and other people voice out, GRZ comes hard on them and says they are tarnishing the image of the country …
@nshimbi, I think you’re bringing in issues has nothing to do with topic at hand. It’s better to know the history of taxation in Zambia before politicizing the issue. Even if HH had become president he was going to inherit the same tax regime which the PF also inherited. What we need are suggestions on how to reduce PAYE on employees without harming government operations not bitterness.
A nice and well researched piece of writing ,just hope the minister and his people will get something from this information .
From the analysis our Zambian tax bands indicates that any income above $689 is taxed at 37.5 % whilst the rest of the countries it is taxed at the range of 10% to 18% only .NONSENSE!
The reduction in PAYE will result in more buying power which will result in creation of some jobs and poverty reduction.
Correct analysis!
This is a well researched piece of work. I hope the Ministry of Finance technocrats have seen it and advise the Minister of Finance accordingly. Zambia’s salaries bands are among the lowest in the region and yet are highly taxable. This does not make sense. Ministry of Finance and ZRA must broaden sources of income and make PAYE friendly.
I wish ZICA could also give us their position on the mineral tax policy, how government has performed in terms of public expenditure in the first half of 2017. Zambians would like to know ZICA’s position on Misappropriation, unretired imprest and misallocation of public funds that have been highlighted in the Auditor General’s reports over the years. These offences have been committed by public accountants who in most cases are members of ZICA. They must also give us the position on whether Zambia needs the IMF programme or not. They have also not spoken on the debt position of Zambia and Lungu’s reckless borrowing both domestically and externally and reckless spending.
But let me guess, they are busy preparing difficult and unreasonable exams for their students to ensure few…
(Nigeria, Ghana, Kenya & South Africa). What was the basis of this sample collected? Why not use the bands of all the countries within the Southern African region. Let me guess, Malawi, Angola, Zimbabwe, Congo & Namibia are worse off than Zambia. They would have worked against the author of this article. Anyway, I still agree that the PAYE regime has to be revised to increase the disposable income of ordinary Zambians.
cant you see Angola and Zimbabwe dear in the writeup?
In fact RSA, Malawi, Botswana, Mozambique, Mauritius, etc are there. look again carefully this time.
Scandalous type of Tax Regime in Zambia!!!!
Vasco de Lungus travels are EXPENSIVE! How will he be able to go and watch naked Swazi girls if you do not donate him the money through your taxes?
A well written submission for PAYE downward revision. I hope the MOF will put this into consideration if they have to help spur economic growth through increased disposable income and savings which will also spur investments through bank loans and reduced interest rates.
The impact of the reduced PAYE on the economy will be obvious and immediate.
GOOD REASONING. THE MIDDLE CLASS SHOULD SP[R DEMAND FOR GOODS AND GENERATE MOTION IN MANUFACTURING INVESTMENT.
Looking at these figures its even better to go and leave in Zimbabwe or Congo DR. There Tax regimes are a lot better.
This is what we have been crying for all along. PAYE is too much for the majority working class. This is not empowering at all! The one ZICA is proposing is also too much mwebantu. It must come down to 10%. We have a lot of government resources and ventures which are not been used or are underused due to ineptness on the part of of implementers and enforcers. The only thing leaders can think of is introducing more taxation ideas like making citizens pay for cabbage collection at k10 for every talk time loaded. It seems we have stopped thinking indeed. We have water resources that we barely use, our tourism is pathetic, we are not patriotic with our mineral wealth, our boarders are so porous that even what we collect there is nothing compared to the true value of the business there, vast…