Press statement from the Chamber of Mines

Zambia Revenue Authority, VAT Rule number 18(1(b)) should be amended and ZRA has an obligation to pay the outstanding vat refunds

We have been surprised by some media reports that appear to indicate that the chamber of mines (cmz) has reached an agreement with the ZRA to resolve a contentious issue relating to the non-payment of input vat to exporters by the ZRA.

In the report aspersions have been cast that the chamber of mines proposed to maintain rule 18 in its current form as it is meant to strengthen the vat system.

It is incorrect to characterize the issue of vat refunds as an issue for the mines alone. ZRA has been withholding refunds for all exporters, as evidenced by a letter from the Zambia chamber of Commerce and Industry to the Minister of Finance. This issue therefore concerns the entire economy.

The chamber recognizes that a number of other important sectors such as agriculture and manufacturing have been adversely affected by the current requirements by ZRA under rule 18(1) (b).

The chamber therefore regrets the cynical and gross misrepresentation being perpetuated that the issue of vat refunds only applies to the mining industry.

We wish to state the following;

1. The Finance Committee of the Chamber of Mines comprising the Chief Financial Officers (cfos) held a meeting with the Zambia Revenue Authority, present was the Commissioner General, Director Investigations, Director Large Tax Payers Office, Deputy Commissioner – customs services, and Acting Legal counsel at Revenue House

2. The purpose was to discuss the outstanding VAT refunds as provided in the law. The backlog has accumulated to over US $600million to-date

3. The meeting was also called to discuss the provisions of the value added tax rules of 1997, rule no 18(1). Rule 18 has been in effect since 1997 but this rule has never been fully enforced due to the impracticalities of doing so. However in
2013, the ZRA began to enforce this rule creating difficulties for exporters to reclaim their input vat.
The Chamber had proposed to the Zambia Revenue Authority that the requirement that exporters of goods and services should submit documents from importing countries be amended as we hold it that ZRA shipping inspection and documents are sufficient proof to demonstrate that an export of goods and services has taken place.

In particular, we are concerned that documents generated by the Zambia Revenue Authority are deemed as insufficient or inadequate to demonstrate proof of export.

Although ZRA expressed concern that some members of the chamber have taken ZRA to court and could not therefore deal with the tax refunds so far owed, the chamber held that the matters are separate and should be dealt with accordingly.

The cases in court relate to rule 18 which would automatically be resolved once the necessary amendment to the rule is enacted.

It is important to note that we have been making these submissions to all relevant authorities.

Zero rating of exports is not a tax incentive and is applicable across many countries. it is designed to promote the growth of export earnings through competitive pricing in the international market.
We wish to state that ZRA withholding tax refunds which exporters are legally entitled to, will render their products uncompetitive.

On 23rd October 2013, we submitted to the parliamentary expanded committee on estimates, among other things that rule 18(1) (b), be amended. The requirement that the exporter produces documents from the importing country was difficult to implement and comply to.
on 4th February 2014, we made another submission on the effects of withholding the refund of value added tax by Zambia Revenue Authority on metal exports by mining companies to the then acting secretary to the treasury, Mr. Felix Nkulukusa at the ministry of finance were we indicated the implications as follows:

1. Non-refund of VAT for the period august 2013 to date, to the tune of more than us$600 million has impacted both on the mining companies and the ancillary industries.

2. Severe liquidity crisis faced by the companies has resulted either in incomplete inability or delayed payments to suppliers and contractors.

3. Some operations are having difficulties in funding employees’ salaries

4. Slow down or complete stoppage of capital expenditure and improvement projects

5. Local suppliers unable to procure their imports

It is a well-known fact that copper exports follow a thorough documented procedure which is verified at the Zambian port of exit, through the ZRA’s Asycuda system. We hold that the documents produced by the ZRA to the exporter are sufficient and valid.

We also argued that the regulatory burden ZRA was giving itself would impede the smooth facilitation of trade and efficient handling of transactions.

In addition, we have, like every other sector, on 31st July 2014, made proposals for an amendment to rule 18(1) (b), as part of our submission on the mining sector national budget proposals for 2015 and also the 2015-2017 medium expenditure framework.

LANDS, Natural Resources and Environmental Protection, Minister Mwansa Kapeya has warned that Zambia risks being ‘recolonised’ if it continues giving huge chunks of land to foreigners.

Speaking during a media briefing in Lusaka yesterday, Mr Kapeya said when the country attained its Independence in 1964, some colonialists were unhappy to leave Zambia as it was endowed with fertile land and the natural resource which was a source of conflict in other countries.

Mr Kapeya said it was in view of the foregoing that some foreign nationals were trying to recolonise Zambia by acquiring huge tracts of land under the pretext of being investors.

“We will be 50 years of Independence after next month. Mind you, some of you (journalists) were just born a few years ago, you were born after Independence. The people who were governing, colonisers who colonized this country, were not happy to be chased away from a wonderful country like Zambia with fertile soil.

“They are there watching which ways should they come in and recolonise the country and if we are not careful they can come in another form and recolonise the country through acquiring of chunks of land,” he said.

He said President Michael Sata, who by virtue of his position owned all land in the country, was cautious on land matters and would not allow foreigners to possess more land than Zambians.

“Our current President is so careful that if we don’t control the land in this country it may fall into wrong hands. That’s why the President is saying okay which ever investor wants to come, 75 percent (of land) Zambians must be there,” he said.

Mr Kapeya said his Ministry had received reports that some traditional leaders were going beyond 250 hectares by selling more than 10,000 hectares of land to investors.

He warned that investors who had bought land straight from traditional rulers without the approval of his Ministry had lost out as their investment would not be recognised by Government.

A COMBINED team comprising the Lusaka City Council (LCC) police and the Zambia Police Service swung into action on Thursday at midnight and demolished 46 illegal shops at New Soweto Market.

The shops were demolished as their owners had no planning permission from the LCC and the structures were built on the New Soweto boundary wall and on private property.

The affected shop owners stormed the Lusaka Civic Centre yesterday morning to air out their grievance and were addressed by Deputy Mayor Potipher Tembo.

Mr Tembo said his administration did not want to encourage illegality in the city and thus requested the traders to avail him with the necessary documentation to prove that the LCC permitted them to build shops at New Soweto Market.

Then failure by the complainants to produce the documents he had requested from them prompted Mr Tembo to urge them to meet him on Monday with valid documentation to prove that they had permission from the local authority to erect their shops at New Soweto market.

“Show me your papers. If you don’t have papers, don’t even come here because we don’t encourage illegalities. The Council is the one that gives the necessary documentation.

“We don’t want to talk about this issue without papers because you may waste your time here. So through the chairman on Monday bring the papers so that we see the validity of those papers. If they are not valid then it’s your own fault because you have the right to come to the council and make formal applications,” he said.

LCC assistant public relations manager Brenda Katongola in an interview urged members of the public to follow laid down procedures.

“Let this (demolition) be a warning to other people who would want to do illegal things that the council is on the ground,” she said.