Tax exemptions are narrowing Zambia’s tax base, says IMF Country Rep

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IMF Zambia country representative, Alfredo Baldini
IMF Zambia country representative, Alfredo Baldini

THE International Monetary Fund (IMF) has observed that certain tax exemptions are narrowing Zambia’s tax base which urgently needs to be broadened to allow Government collect more revenue for development.

IMF Zambia country representative, Alfredo Baldini, observed that tax exemptions on certain areas which had special treatment were narrowing the tax base.

Dr. Baldini emphasised that Zambia needed to improve on its tax administration to capture more revenue from all areas of the economy.

“The overall collection which is a problem in the region and it is also in Zambia is that taxes need to be extended and broadened and the fact that the main tax exemption including Value Added Tax and certain sectors have special treatment, creates a narrow tax base,” he said.

He was speaking in Lusaka yesterday at a media briefing where Government, IMF and the European Union gave an update on the just ended 2019 Africa Fiscal Forum.

And when asked for a comment on the assumptions that Zambia had one of the highest taxes in the Sub-Saharan region, Dr. Baldini said “the Zambian system is on 35 percent progressive threshold and that is not in line with international compliance, it is not very high. The problem in the region is improving compliance.”

Dr. Baldini also said the requirement for all bank account holders to have Tax Payers Identification Numbers would improve tax avoidance.

And IMF African Department deputy director, Roger Nord, explained that the forum focused on international and cross border taxation, inequality and fiscal policy and digital revolution.

Mr. Nord explained that the forum discussed how African governments could put in place taxes which would ensure multinational companies did not avoid tax, thereby lowering the tax base.

Meanwhile, acting Secretary to the Treasury, Mukuli Chikuba, said the forum provided an opportunity for Government to reposition itself on how to have a better tax administration.

“We have learnt a lot on how Zambia can reposition itself to move away from the usual targets that we have in tax policy pronouncements in the medium term and this is the review that we want to take in the 2019 national budget,” Mr. Chikuba said.

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26 COMMENTS

  1. I am not into these things, but I’ve picked one thing…tax exemptions…as we “beg” for people to invest in our country, exemptions seem to be the only incentive to attract them.

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    • That’s the mindset we need to emancipate ourselves from! You don’t need to beg for investors because they are the ones in need of your resources. If they don’t come now, they’ll come later but they will definately come!

      Either you broaden your tax base, as the man recommends or you start thinking of other ways of making your products more valuable/competitive and market them yourself. We have nothing to lose even if we hoard our copper in stock piles! We could be exporting in form of wire coils, tubes and pipes yet we are still allowing it to leave the country as raw material.

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    • @nine chale, I didn’t literally mean what you read…there’s some irony in it if you read slowly. Just to amplify on this we have local experts who are against imposing reasonable taxes on foreign companies operating in Zambia. They say taxes are forcing companies to take their capital to more friendly countries. But here we are….The IMF is saying the exact opposite.

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    • Ba Ndanje Khakis, but you know what happens when the tax exempt period for these companies end. The countries leave the country or change their names. who is fooooled with these exempts; its Zambia

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    • Manb,they don’t even leave the country, they just pretend to sell to another company…which in most cases is a subsidiary or something.

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    • The problem is not the tax base but how the money is used.
      Give a fool a million Kwacha and give a wise man the same amount.
      The fool will go on a spending spree and buy lavish items such as luxury SUVs, flashy clothes, he will neglect his family and start marrying new wives, he will leave his own house in a poor state due to excitement.

      A wise man will first and foremost educate his kids, invest in a farm and a house. He will then assist his own community where he can. Sponsor orphans, help by grading a road or two to his farm which will also assist his neighbours, he might even put up a community bore hole for his neighbours to draw water from. Unfortunately we have a govt that is excited and busy buying luxury SUVs, paying its top civil servants abnormal salaries and allowances…

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    • The problem is not the tax base but how the money is used. Give a f000l a million Kwacha and give a wise man the same amount. The f000l will go on a spending spree and buy lavish items such as luxury SUVs, flashy clothes, latest phones etc he will neglect his family and start marrying new wives, he will leave his own house in a poor state due to excitement. A wise man will first and foremost educate his kids, invest in a farm and a house. He will then assist his own community where he can. Sponsor orphans, help by grading a road or two to his farm which will also assist his neighbours, he might even put up a community bore hole for his neighbours to draw water from. Unfortunately we have a govt that is excited and busy buying luxury SUVs, paying its top civil servants abnormal salaries…

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    • ” THE International Monetary Fund (IMF) has observed that certain tax exemptions are narrowing Zambia’s tax base which urgently needs to be broadened to allow Government collect more revenue ” to pay off the Eurobonds.

      When even the IMF is making weak noises about taxing the transnational corporations, which they should know is an impossible task, and the PF is not, probably because they don’t want to undermine ‘investor confidence’, you know what the corruption is all about.

      The problem is that the PF was bribed not to collect the dividends from the mines, and instead took on Eurobond debt (with interest). That’s why there is inflation, so people are already paying for this theft. I blogged about that 6 years ago. So when is this nonsense going to end and who is going to end…

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  2. And Lazy Lungu is there saying he is creating an “enabling environment” yet he is giving tax parachutes to mines and his Chine friends…we are being told this by IMF who gain nothing in informing us.
    Zambians wake up from your docility …we have put soulless individuals in power who are only there to fatten there pockets.

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  3. Dr. Baldini emphasised that Zambia needed to improve on its tax administration to capture more revenue from all areas of the economy.
    But the main issue in Zambia is fiscal indiscipline.

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  4. AGAIN it has to be a WHITE MAN TO TELL BLACK PEOPLE HOW TO BROADEN THE TAX BASE CAN MR MUTATI GO TO NORWAY AND TELL THEM HOW TO COLLECT TAXES AH MY FOOT

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    • Does Norway come to you to beg for a loan? When you learn to wash your heavily soiled pants then talk….

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  5. The main problem is the small tax base is mercilessly squeezed while Zambia squaders chance after chance at increasing the tax base by way of more manufacturing…..look at how we could employ tens of thousands into the textile industry but instead all GRZ uniforms are imported……..look at how we should be assembling solar panels with zambian copper but instead you let them come in tax free but the shops are not passing on those savings…….look at how GRZ is losing out at making it mandatory to have fire detection and fighting appliances in all public spaces…..appliences that should be made in Zambia…..instead we have very lazy ministers too lazy to do the ground work….all we hear is “we are creating an enabling envitioment”…shhaaa..

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    • Spaka, you write about all these nice ideas of setting up manufacturing companies but who is going to do that. Because nearly all our Zambian businessmen are into trading of either goods and services and not manufacturing. That is where we have got it wrong as Zambians because we expect foreigners to come and invest in manufacturing and when they do we start complaining. Secondly, Zambia has a small population compared to our neighbouring countries except of course the 2 desert countries. So, who is going to set up a big manufacturing plant when the market is small? As long we Zambians don’t invest in manufacturing lets forget about it unless we want the Chinese who are the only people investing all over the world.

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    • Habeenzu

      After supplying the local market Zambia can start exporting….how is lesthoto a smaller country than Zambia able to export textiles ??….you see as GRZ you can not just say we have created an enabling environment so Zambians get on with it , no……….for real manufacture GRZ needs to take the lead…….needs to assemble a team…..needs to provide training……..needs to identify sources of capital……and to begin with needs to guarantee a market…inshort GRZ needs to bang a few heads together in a locked room.

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    • There is no trick here. There is no special program. What is going on is that neoliberal econics destroy the economy, destroy whatever is left of a middle class and of course make poor people even poorer. It is a rule by elites, not rule by the people. And the globalizers are implementing these policies in every country in the world. And the effects are always the same. And they only care beyond the extent that the masses are showing up on their doorsteps – like usual. Like the Bonus Army. Or Woodstock. That is the only thing they fear. Look at what neolib policies did to Greece, Spain, Portugal, the UK.

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  6. Ba LT did you send a quality reporter to this event? What is this quote saying:
    “The overall collection which is a problem in the region and it is also in Zambia is that taxes need to be extended and broadened and the fact that the main tax exemption including Value Added Tax and certain sectors have special treatment, creates a narrow tax base,” he said.
    Anyone follow?

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  7. Proverbs 29:18 say:
    Where there is no vision, the people perish: but he that keepeth the law, happy is he.

    Does President Edgar Chagwa Lungu have any vision for this country, his people?
    People exporting mukula tree, are they doing it within the law when there is a ban?
    Let us get the technology and skills to process our raw materials locally, add value, employee and empower our youths, be happy.

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  8. Tax can be used to redirect investment in sectors that need to be incentivised,sectors were neither Zambian entrepreneurs nor the govt can not provide.Taxes can also be used to capture public resources such as minerals,timber etc for the benefit of all the citizens. Taxes can also be selectively applied to attract specialised skills in the processing of raw materials to finished goods called value addition! By exporting raw materials Zambia is exporting employment and all its multipliers, to its own disadvantage. Between raw materials and finished product lies a multiplier: an industrial process demanding and creating knowledge mechanisation, technology, division of labor, increasing returns and- above all – employment for the masses of underemployed and unemployed that has always…

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  9. And now GRZ has squeezed the poor workers even more by removing tax relief on amount paid to NAPSA in the name of broadening tax base, which in essence is not broadening at all. This means, as a worker you will have to pay more in taxes in form of PAYE.

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  10. He is correct when you relate it to cost of capital Debt is often an after tax cost of debt and when Investors do the Investments over the tax “free and sectorial”, they should come on and pay taxes at appropriate rates and Zambia seems to be average on most of these taxes when it comes to corporate or royalties or Vat

    Its normal for a country like Zambia also to have some tax freedom in some sectors and if shared by weighted by GDP in those Sectors countries in developed countries must be seen on the other side with developing like Zambia In investments activation. Some weighted GDP tax measures in some sectors can be considered but true…

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  11. these corporates should remember Government and compensate in commensurate with grown businesses when tax periods have been

    True also those tax exemptions could be relooked at it could be some source o REVENUES especially in mining and energy

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Comments are closed.