ActionAid calls on Government to set political and personal interests aside to resolve VAT payments issue

ActionAid is appealing to Government to consider the consequences of retracting the previous agreement they made with the Zambia Revenue Authority (ZRA) regarding the conditions which should be met by exporters in order to qualify for VAT zero rating of exported goods, and set political and personal interests aside when considering the issue.

This follows a statement by the Chamber of Mines earlier this week in which it denied having reached an agreement with ZRA. In addition, it contested the enforcement of this regulation by ZRA from 2013 onwards, by arguing against the requirement for exporters of goods and services to share documents from the importing countries, with ZRA shipping inspection and subsequent documents qualifying as sufficient proof of export.

ZRA’s decision to withhold ZMW3.5 billion close to $600 million VAT refund on account of taxpayers who had declared zero rated exports but had not furnished all the required documents, is reported to have attracted the attention of Minister of Finance Hon. Chikwanda who proposed that ZRA should amend VAT rule no. 18.

Kryticous Patrick Nshindano, economic justice project officer at ActionAid said: “The call and subsequent decision to revoke the requirements to provide proof of transactions for our exports is not based on strong, substantive and convincing grounds. There has been no explanation as to why it is difficult for mining companies to disclose where they sell their products and at what price. We are of the view that the requirements and conditions put across by ZRA to affect refunds are realistic and made in good faith, bearing in mind that some companies take advantage of any gaps in our tax regimes to dodge paying fair share of their tax obligations.

We believe that the conditions instituted by ZRA aims at addressing information asymmetry and promote transparency with respect to the actual prices of the exports which may be useful in countering creative accounting and negative tax planning often used by some companies to evade paying fair share of their tax obligation. We believe the disclosure of information ZRA is asking for is useful in auditing and computation of corporate tax bearing in mind that many big companies have been year in and year out declaring losses.

“Yet again we have seen our leaders compromising and bowing to pressure from big companies to shy away from their responsibility to safeguard our national resources. We encourage and cherish investments in our country but it is responsibility of the companies to act in a transparent and accountable manner. It is unfortunate that whenever there is effort to bridge gaps and loopholes being exploited by big companies to avoid and evade taxes, our leaders quickly back track on their resolve to address these gaps. It is saddening to see the continued contradiction in trends where we have to borrow and yet not doing enough to raise revenue.”

“Multinational companies regularly deprive Zambia of vital money that could be used for much needed public services such as education and health. Measures must be taken to close the tax loopholes that facilitate this and not implementing VAT rule no. 18 deprives us of the revenue we need to provide basic services for majority of our citizens.”

The Private Sector Development Association (PSDA) has observed that amendment of Rule 18 of the Value Added Tax Rules of 1997 will not substantially affect Zambia.

On Tuesday, 2nd September, 2014 Zambia Revenue Authority (ZRA) Commissioner General Berlin Msiska announced the amendment of the VAT Rules with effect from 8th September, 2014.

PSDA Chairperson Yusuf Dodia has told Qfm news that with such an amendment, it is possible for an exporter to claim the export of products to a country such as Switzerland when in fact the goods are destined for China as there will be no need to show proof of the destination of the goods in reality.

Mr Dodia says it is for this reason that he also thinks, for example, that the companies that are buying the country’s copper exports are not the ones using the mineral, stating that documentary evidence shows that 80 percent of the copper goes to Europe when the reality on the ground is that it actually goes to the far East.

Mr Dodia however states that his association is of the view that as a source of additional information, it is important that the country knows who is consuming its mineral exports.

THE Ministry of Local Government and Housing says it will no longer be responsible for disbursement of Constituency Development Fund (CDF) and local authorities will now be getting their allocations directly from the Ministry of Finance.

The measure is aimed at curbing misappropriation and abuse of public funds following the alleged fraudulent withdrawal and diversion of K1.3 million 2013 CDF allocation for Rufunsa District Council by seven officials at the Ministry of Local Government and Housing.

Ministry of Local Government and Housing permanent secretary Stanford Msichili said this on Zambia National Broadcasting Corporation’s (ZNBC) Radio two Government Forum yesterday.
Mr Msichili said the measure is with immediate effect.

“Because of the Rufunsa CDF money which was misappropriated by some officers at our ministry, we have decided that the ministry will no longer be handling CDF. It shall be paid directly to the constituencies from the Ministry of Finance,” Mr Msichili said.

He said, however, that this does not stop the Ministry of Local Government and Housing from following up shortcomings in the utilisation of CDF.

Mr Msichili said Government is concerned about people’s negative perception of the administration of CDF and that it is working hard to clean its image.

“The perception is that we are corrupt and we have to change the perception and citizens have to help us so that our service delivery can be improved,” Mr Msichili said.

He is also concerned that Zambia has a housing deficit of two million.

Mr Msichili said Government does not have the financial capacity to construct houses for everyone but it is mandated to create an enabling environment to enable citizens intending to acquire real estate through the Zambia National Building Society (ZNBS).

“Government’s resource envelope is not enough to take care of all our housing needs and other infrastructure developments that the country may require,” Mr Msichili said.

He said the answer lies in Public-Private Partnerships and the initiative is paying off.
“We are also looking forward to a time when public servants can benefit from such programmes so that they do not retire as paupers,” Mr Msichili said.

He also said the ministry is overwhelmed by service delivery due to an increase in population.

Mr Msichili said there are a number of institutions that want to construct housing units but are constrained due to shortage of land.

He appealed to local authorities to make land available for such developments.
He also appealed to service providers to provide services in new areas that are being opened up.

“What has gone wrong in the past is that people have been allocated plots but certain services have not been provided and they have found it difficult to develop their plots,” he said.

Mr Msichili said service providers should be coordinated so that all services are available in areas where people are carrying out constructions.

Mr Msichili also said there is urgent need to revamp the inspectorate to monitor areas that are being developed without the consent of local authorities.

He said this will prevent illegal structures and unnecessary demolitions.

Mr Msichili said the ministry does not take pride in demolishing structures.