ZICA urges govt to treat appointment of Auditor General as urgent

THE Zambia Institute of Chartered Accountants (ZICA) has appealed to the government to appoint a substantive Auditor General as a matter of urgency.

During the institute’s fourth quarter briefing yesterday, Jason Kazilimani, the ZICA president, said in previous quarterly briefings the institute had consistently raised issues relating to the appointment of the Auditor General, the operationalisation of the Public Audit Act 2016, and the State Audit Commission Act, 2016.

“We have noted that these matters have remained unattended to. As a professional accountancy body, we are concerned with the situation because the Auditor General’s office is a very important governance institution, which should not be left unoccupied for such a long time,” Kazilimani said.

“The qualifications of the incumbent Auditor General should be as appropriately stipulated in the Public Audit Act of 2016. We are aware that the Public Audit Act has not been operationalised and therefore a substantive Auditor General has not yet been appointed. We have noted, through the public media that the appointment or confirmation of the acting Auditor General will have to wait until the current Republican Constitution is amended. We, however, note a precedent for a similar situation. When the office of the Clerk of the National Assembly fell vacant, the Clerk was appointed, whilst the Parliamentary Service Commission had not yet been operationalised. Because of the importance associated with the Office of Auditor General, we believe that the same can, and should be done. We appeal to the authorities to proceed and appoint a substantive Auditor General as a matter of urgency.”

On tax issues, Kazilimani noted the government’s decision to overhaul the Value Added Tax system and replace it with the Sales Tax system.

He said the measure came as a surprise to many economic players because such a huge fiscal shift required wide consultation and adequate preparation for both the taxpayer and administrators.

Kazilimani recalled Zambia introduced Value Added Tax on July 1, 1995 to replace Sales Tax.

“Like VAT, Sales Tax is a consumption tax imposed on the sale of goods and services levied at the point of purchase from the consumer. Unlike VAT, which is deductible by the seller of goods and services, Sales Tax is non-refundable. It is an example of an ad valorem tax and is based on the price of the item sold,” h eexplained.

“ZICA recognises that there are challenges in the administration and collection of VAT that need to be addressed. With concerted effort, we believe these are surmountable challenges, which should have given pose to the decision to abolish the VAT system. Specifically, the huge VAT refunds accruing to the mines is contributing to the liquidity challenges of the mining companies as they partly rely on the money being withheld by the government for their operations. However, the question is whether the proposed sales tax system is the right remedy to the perceived revenue leakage.”

Kazilimani advised that as the nation considers the introduction of sales tax, it was important to take stock of how the system would be implemented with minimal interruption to business and the economy.

“Currently, there is lack of information about how it will be implemented, and at what rate, thus leading to investor anxiety and uncertainty in corporate planning, budgeting and forecasting. There are fears that most businesses, especially the mines may react by scaling down their operations,” he said.

“The lack of certainty in the sales tax system negates the fundamental principle of a good tax system. We think that in the absence of further consultation and thorough research, the proposed system should not be rushed but instead the Minister [of Finance Margaret Mwanakatwe] must carefully study the rates to be applied, the period of transition and the framework for the sales tax system. It is also important to ensure that there is a support structure and well-planned administrative system in place before the Sales Tax system is introduced.”

Kazilimani said it was ZICA’s considered view that abolishing the VAT system without a proper system to administer the proposed sales tax regime, coupled with adequate information for all stakeholders, might not be appropriate.

“However, the Minister should instead have addressed the causes of underperformance and review the various provisions in the VAT exemption order. The move to Sales Tax may not be wholly appropriated given that most jurisdictions globally are on the VAT system and many others are considering migrating to it, due to its various benefits,” he said. “According to the Organisation for Economic Co-operation and Development (OECD), 166 countries in the World operated VAT as at 2016. More recently, other jurisdictions have migrated to VAT system including Tanzania (2015), Egypt (2016), and India (2017). Further, more countries from the member states of the Middle East Gulf Cooperation Council are at different stages of introducing VAT.”
Kazilimani said in the event that Parliament approved Sales Tax, it would be desirable to have a reasonably low rate and appropriate exemptions for strategic industries.

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