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Alba Iulia
Monday, September 28, 2020

Motivation for Sales Tax is misplaced – Tembo

Headlines Motivation for Sales Tax is misplaced - Tembo

Minister of Finance Margaret Mwanakatwe
Minister of Finance Margaret Mwanakatwe

The Patriots for Economic Progress says Finance Minister Margaret Mwanakatwe is motivated by the wrong reasons in her policy decision to substitute a Value Added Tax Regime for a Sales Tax regime.

Party President Sean Tembo says if the Minister had fairly and objectively applied her mind to the issue of VAT refunds, she would have come to a different conclusion in terms of what needs to be done to address the problem of large VAT refunds, other than to substitute with Sales Tax regime.

Mr. Tembo said the Minister did not objectively seek to address this matter but instead adopted a simplistic solution of substituting the current VAT regime for a Sales Tax regime.

He charged that the reason why Zambia has a problem of large VAT refunds that are currently averaging K1. 4 billion per month, and the reason why this problem of VAT refunds only arose during the current PF administration is because of a policy change in the tax framework which the PF made about 4 years ago in their quest to increase tax compliance among VAT registered suppliers.

Mr. Tembo said what added a final nail in the coffin of this policy of withholding the gross VAT is that most of the parastatal Tax Agents like ZESCO and ZAMTEL are cash-strapped so when they withhold the gross VAT from a VAT registered supplier, they do not remit that gross VAT to ZRA.

He said additionally, the absence of the input-output principle in a sales tax system will mean that sales tax will be a cost at every stage of the value chain.

Mr. Tembo said this will collapse certain low-margin sectors such as the petroleum sectors where average margins are as low as 3 percent.

He added that this will also bring about uncontrolled inflation that may degenerate into hyperinflation and subsequently collapse the entire economy.

12 COMMENTS

  1. Sean, what has happened to your hunger strike??? We need an update please so that we can support you.

  2. After 27 years of independence, Zambia under UNIP had learned a lot on what direction to take the country. But the MMD started experimenting based on capitalism thinking investors would come in and build the economy. That unfortunately is what we are still grappling with because these so called investors are basically white collar criminals who what to reap exorbitant profits at the expense of the country. All of them are in to reducing their tax burden to almost zero and laughing all the way to the bank.

    • I think you were born during the shortage of essential commodities,including salt, which unip created as a result of their enkonome policy,blanked nationalisation!!The developments you are seeing was initiated by the first MMD government, but destroyed later.MCS re-launched because he was one of part of the first MMD government!!

  3. These empty tins have already signed it into law…the foooools will not U-turn…they can manage VAT as they are reckless!!

  4. One expectation is that big players in the economy like mines will try be all means remove the middle man especially suppliers on the Copperbelt who rely on imports . Mopani and others may instead import directly from SA, only pay import sales tax and save at least 9%.

  5. A very brief but brilliant analysis from Mr Tembo – a politician, on the adverse effect of Sales Tax as compared to VAT. Kindly advise your fellow politicians accordingly in a friendly and constructive manner – you are very right.

  6. I suggest that as Zambians let us have an open mind on this matter. Mr Tembo have not mentioned the solution to mines and multinational corporations who use transfer pricing to claim huge amounts of vat or those in exploration and are claiming vat refunds. Will it be right to have different tax regimes for mines and none mining businesses? What is the solution to this problem? We know that multinationals exploit Africa a lot. Being an accountant and a presidential aspirant how would you handle this vat problem if you were in plot one?

  7. Sean Tembo, did you participate in the ministerial public forum on VAT vs Sales Tax? No? You boycotted like all trib.als? Therein lies the problem, there are many different viewpoints not just yours Mr Trib.al Sean!! Participation means your views are taken aboard, otherwise you remain irrelevant like Trib.al Hacks and yet he dances to the tune.of POA, etc.

    • There is enough media that covered it live you don’t necessarily have had to be there ????? And what is this obsession with tribe ?? Ubututu bwaifi bane tuchefyeko

  8. You lose it when you criticise for the sake of it.

    The problems he points out with V.A.T is what GRZ has seen in insufficient tax collection to fund public sectors like education and infrastructure, while mining boomed and signs of untaxed wealth were all over to see. Paying un-refundable tax mainly directly to ZRA without middlemen is the best solution. Nothing else is Sean offering apart from more consultations for consultations, more tax bureaucracy, and hoping parastatals can be profitable since they are inherently not, in order to provide affordable goods and essential services like electricity cheaply to the majority that can’t afford to pay their real cost.

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