Logic Dictates That Governmet Holds-On To Sales Tax Implementation Pending The KCM Issue

The Movement for Multiparty Democracy (MMD) has reiterated it’s call to have the implementation of the proposed new sales tax regime deferred owing to challenges being faced in the mining industry and the fears expressed by a number of key stakeholders.

MMD National Executive member Christopher Banda observed that Government has remained adamant with it’s intention to implement the General Sales Tax despite many stakeholders advising against the move something he said would hurt the country’s little economic gains.

Banda who is the head of the party’s economic advisory committee said his party is dismayed that government wants to go ahead with the implementation of the new tax going against professional advise from stakeholders including that of his president who is the immediate past finance minister who advised against the move when he appeared before a parliamentary select committee recently.

He said the commendable move to revert back to austerity measures contained in the Zambia-Plus economic blue print as announced
by government on Tuesday will go down the drain if a realistic approach and advise is ignored.

“We commend government on austerity measures as there is no other way out of the current economic hurdles, however government needs to listen to concerns on the new proposed sales tax.

“Those entrusted with leadership should realise that being voted into office does not mean that they have a monopoly of knowledge and wisdom but they are there as stewards hence the need for them to listen to the different views of stakeholders on matters of national interest. The success of a government is a success of the people and key to successful governance is having a listening ear to stakeholders on issues that affect the nation.

“We note with dismay though, the haste with which the Ministry of Finance wants to implement the general sales tax this coming July against calls from stakeholders to defer it to next year. We are of the considered view that government should not be adamant with the proposed tax until all the fears are cleared including all pending issues in the mining sector which is one of our largest FOREX earners,” he explained.

Banda further noted that the current situation in the mining sector particularly the happenings at Konkola Copper Mines (KCM) does not provide an ideal economic environment for the country to implement a new tax system.

He said the implementation of a new tax regime will be counter productive hence the need to first ensure that the challenges in the mining sector are fully resolved before considering the new tax system.

“With the current “Cat and mouse” with Konkola Copper Mines-KCM, it is not economically prudent to go ahead and implement a new tax regime. The current challenges facing the mining sector require us to be extremely careful to avoid further deteriorating the little fortunes in the industry,” he said.

He said his party strongly believes that the proposed abolishment of the Value Added Tax (VAT) System, which is to be replaced by Sales Tax with the objective of enhancing contribution of consumption taxes to Government revenue should be deferred further.

He said the new tax regime is inconsistent with the general trend in the region
as most countries across COMESA and SADC have moved away from a Sales Tax System.

“A Sales Tax is considered to be more vulnerable to tax evasion than a modern VAT system where revenues earned and expenditures incurred by businesses across the value chain can be easily tracked by the revenue authorities.

“Furthermore, introducing a Sales Tax could hamper free trade in the region as most countries have adopted a VAT system which is more conducive to easy movement of goods across borders. It is hoped that a detailed and comprehensive study be carried out which properly considers the overall economic and administrative impact of a change in the system of taxing consumption before hurriedly changing the system,” he added.

Banda also said going ahead with the implementation of the new tax would not only be detrimental to new business formation but will also discourage innovation and value addition.

“If we go ahead it will be to the detriment of new business formation and discourage the innovation, value addition and productivity growth of the overall economy constraining our ability to achieve fundamental economic and social goals.

“We can only hope government’s decision on this one will be not centered on a narrow and simplistic politics concerning the mines VAT tax refunds but on the broader economic spectrum of all the many other Zambian businesses as the scope of government regulations must be vast and reaches all sectors of the economy and all aspects of our daily lives,” he said.

He has since cautioned government saying reforms such as the ones government wants to embark on comes with a heavy cost to small businesses.

“Because such reforms can come at a heavy cost on smaller businesses. Business leaders often complain that constant Policy inconsistency especially changing a tax regime creates confusion and weighs down their operations. The quicker you want to make changes in the law or regulation, in general the costlier it will be because for firms it’s very expensive to change quickly in the short term.

“Logic dictates that we hold on or further defer to next year the implementation of the new proposed sales tax regime until we clear or allay the fears in the economy especially that being expressed by experts.”