ZAMBIA’S salaried employees are presently the highest taxed persons in the region, according to ZICA.
The Zambia Institute of Chartered Accountants (ZICA) says there is need for a tax system that grants relief to salaried employees while at the same time allowing the wealthy to to pay a little higher.
“The accountancy body has observed that Zambia’s salaried employees are presently the highest taxed persons in comparison to other in comparison to other countries in the region,” ZICA said in a lobbying statement to finance minister Felix Mutati ahead of the presentation of the national budget at the end of this month. “Statistics also show that Zambian workers have been the highest contributors to the national treasury averaging at about 25 per cent of the total tax revenue in the last three years compared to seven per cent contribution by corporate entities in income tax.”
ZICA stated that a comparison of effective Pay As You Earn rates among African countries showed that Zambia ranked highly at 34 per cent for annual income of US $50,000 (about K45, 000).
“The Institute [ZICA] further established that an individual employee with a monthly salary of US$3,000 would bear a PAYE tax burden of close to $1,000 in Zambia whereas their counterparts in Kenya will pay around $420, close to $340 in Ghana and around $575 in Botswana,” ZICA stated.
“These statistics, reveal the fact that the current PAYE system creates a disconnect with the economic objective of empowering this category of citizens as their disposable income is adversely affected. The current PAYE regime also negates the Seventh National Development Plan theme of ‘Accelerating development efforts towards the Vision 2030 without leaving anyone behind’. ZICA notes that the key deliverable of poverty and vulnerability reduction as well as reduced developmental inequalities may not be achieved if workers are continuously subjected to high taxes.”
It observed that there was need for a review of the tax system to make it fairer.
“There is need for a tax system that grants relief to this category of taxpayers while at same time allowing the wealthy to pay a little more. Therefore, we propose a reduction of the top tier PAYE tax rate from 37.5 per cent to 35 per cent. We are also proposing widening of lower tax bands to reduce the crushing tax burden on workers. The PAYE tax brackets have not been reviewed in a long time thereby placing a strain on individuals on payroll,”
according to ZICA’s Technical and Standards manager Bruce Mwewa.
He explained that reducing the top tier PAYE tax rate and widening of the PAYE tax brackets would give reprieve to salaried taxpayers who were already subjected to other tax obligations in form VAT on consumption and withholding tax for those in rented housing which would further lead to increased savings, stimulating economic activities.
Mwewa further observed that the amount of allowable monthly pension deduction had been static at K255 for a number of years, hence its value being eroded by inflation.
“The Institute [ZICA] therefore appeals to government to consider pegging this amount to the maximum ceiling for NAPSA contributions,” stated Mwewa. “Increasing the pension thresholds would mobilize savings for infrastructure development and ensure that the ageing population would have sufficient funds at retirement.”