The Zambia Tax Platform is concerned with the measures set out in the 2020 national budget aimed at stimulating the domestic economy.
Zambia Tax Platform Coordinator Ibrahim Kamara says it is evident that the private sector in the country has continued to struggle despite being recognized as the engine of growth.
Mr Kamara said government arrears have contributed to tight liquidity in the economy, while borrowing from the domestic market has crowded out access to finance for businesses to expand.
He said the long term pressure placed on the private sector by the accumulated domestic arrears has also contributed to the declining growth rate of the economy.
“Domestic arrears have increased to K20.2 billion Kwacha in 2019 from K15.6 billion in 2018, a staggering 29 percent rise given the already struggling economy”, he said.
Mr Kamara sais government has proposed to spend only K2.3 billion in 2020 toward the dismantling of domestic arrears which means only 11 percent of the bill will be settled by end of year 2020.
He said this amount is not sufficient considering that suppliers have been affected and their businesses slowed down due to non-payments by Government.
Mr Kamara said it is therefore critical that government prioritizes a consolidated approach to creating an enabling environment for the private sector to flourish especially SMEs who constitute more than 90 percent of the formal sector.
He said to achieve this, government must increase allocation for dismantling domestic arrears to not less than 40 percent of the total arrears to mitigate the slow-down in investment into the productive sectors.
Mr Kamara said government must also consider offering SMEs rebate on turnover tax against potential jobs created such as a 1 percent rebate on tax for every 5 formal jobs created to promote job creation while according government an immediate increase in revenue from PAYE.
He said government should further consider immediately setting up an SME Development Fund to spur economic recovery by directing 2 percent of corporate tax into the fund.