The Bill has proposed a 9% Local Sales Tax and 16 % on Imports which will replace the 16% Value-Added Tax currently used on 1st July.
Chilombo Mulenga has since advised President Edgar Lungu not to assent to the Bill which passed First Reading last Tuesday.
Mr Mulenga said the proposed Bill will cripple the entire Zambian economy.
“Having studied the GST Bill, my advice to President Lungu is veto this bill and subject it to further Expert analysis. Constitute a technical team of Tax Experts and Business Experts to make appropriate adjustments to the current VAT regime to resolve the issues of VAT refunds which have called for the intended repeal of the VAT Act,” Mr Mulenga wrote on his Facebook page.
“This GST Bill demonstrates that Hon. Mwanakatwe is not conversant with taxation system and the wider ramifications of the GST on the economy. Hon. Mwanakatwe is on record for having misled Parliament and she cannot be relied upon over her proposed GST Bill. This Bill is a disaster to the economy and needs to be subjected to an in-depth Expert analysis before it is enacted into law.”
He added, “It appears this country is being subjected to wrong diagnosis for our economic challenges.”
Mr Mulenga said the danger of wrong economic diagnosis is that the solutions devised based on wrong diagnosis cannot solve the problems, but can in fact inflict more problems on the economy.
“Is the influx of cadres in key government institutions and SOE the reason for poor economic diagnosis and inappropriate policy decisions? I fear for this country,” he lamented.
Mr Mulenga stated that the huge backlog of VAT refunds is not a result of a flaw in the VAT regime but that it is because of poor fiscal management and therefore GST is not a solution.
He said, “GST, in its draft form, will inflict more problems on our economy.”
Mr Mulenga said GST is total trash and a disaster to the consumers and a recipe for double taxation and cost build up which will be slammed on the consumers.
“With VAT, tax was fixed at 16% which final consumers would pay, regardless of the value chain processes. With GST, the longer the value chain, the more the cost build up to be occasioned by sales based tax. At each level of the value chain, a tax at 9%, will be levied on the supplier,” he said.
“So if there are say 3 intermediaries before final consumer, with a proposed tax rate of 9%, roughly we could be talking about close to 30% tax build up which will be passed on to final consumers. This is for locally manufactured goods. For imports, 16% will be imposed as border tax and then upon sale by retailers another 16% could be imposed making total tax to 35% to be passed on to consumers.”
He said, “The GST exposes us the vulnerable consumers as all the cost of tax build up will be passed on to us the consumers. VAT limited the tax to consumers at 16% in any case, but the GST casts the net wide open and consumers will pay the tax depending on the numbers of hands the goods exchange from manufacturers or importers to consumers as each party will pay tax upon sale of the goods.”
“Ultimately the final consumer will bear the total tax build up because all parties before the consumer will factor tax in the cost of their sales. This tax is not carefully thought out and drafted. Total crap.”
Mr Mulenga added, “In section 16 of the proposed GST Act, they talk about exemptions. When you carefully analyze s16, you can see that the drafter of this bill are lacking an in-depth understanding of what they are trying to achieve. For example, they attempt to exempt INPUTS. look at this… GST is a tax to be paid by a taxable supplier, so whatever a supplier sells cannot be his input, it is an output to him. So how does he get an exemption?”
“This is totally screwed up and exposes the ignorance of the drafters of this bill. Also they want to exempt some supplies to certain privileged individuals… This would only make sense if the payer of tax is the buyer as in the case of VAT. This also shows the drafters were thinking in terms of VAT, they did not fully understand sales tax they want to introduce,” he said.