The Zambian government on Tuesday defended its decision to scrap value added tax (VAT) in preference for sales tax.
Last Friday, Finance Minister Margaret Mwanakatwe announced the scrapping of VAT, a consumption tax which was introduced in 1995, and replaced it with a simpler non-refundable sales tax after reviewing the various taxes. But the decision has received mixed reactions from stakeholders, with some stakeholders indicating that the new tax was complicated to implement and will increase the cost of doing business. But the Zambian finance minister said the introduction of sales tax will contribute towards improving cash retention.
In remarks delivered at a 2019 budget analysis meeting, the Zambian minister said the VAT was not adding value towards revenue collection. She further said, she has asked the country’s revenue agency to carry out an audit on VAT refunds for the mining industry. The audit was aimed at establishing how much government owes the mines in VAT refunds. According to her, all firms owed will be paid their money before the sales tax comes into effect on April 1, 2019. She said the decision was arrived at after reviewing the various taxes and the need to enhance domestic mobilisation. She further said the Government remains committed to settling the verified VAT refund claims that have so far been accumulated. Meanwhile, the government has also proposed to increase excise duty on plastic carrier bags to 30 per cent from 20 per cent in order to discourage the use of plastic carrier bags and curtail their negative impact on the environment.