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Sales tax will ruin Zambia’s manufacturing sector, fears Simumba

ECONOMIST Trevor Simumba has wondered what kind of a pro-poor government the PF claims to be when it can introduce a “regressive” goods and sales tax that is going to ruin Zambia’s manufacturing sector and result into job losses. In this year’s national budget, finance minister Margaret Mwanakatwe announced various tax changes, key among them the abolishment of the Value Added Tax (VAT) system that was scheduled to be effective on April 1. But the minister, on March 29, told Parliament that the proposed date for commencement of implementation of sales tax would be July 1 this year.

This transition from VAT to sales tax has created a lot of anxiety in the commercial market. Simumba, on Muvi TV’s The Assignment programme on Sunday evening, said goods and sales tax (GST) was going to “decimate the manufacturing sector of this country.”

“This sales tax, for me, should not be introduced at all! They should have dealt with the issues of VAT and the issue with VAT is mainly with the mines. The issue of the VAT refunds with the mines can be resolved without having to introduce goods and sales tax,” Simumba suggested.

“By bringing this sales tax, what gonna happen is that any business man who is doing business in Zambia will rather go next door, manufacture from there and export. A tax system must be progressive – it must be fair and equitable.”

He branded sales tax as regressive in the sense that its biggest impact would be on poor consumers.

“So, what kind of a pro-poor government is this? The PF stood on a platform that they are pro-poor. [But] if you are pro-poor, why introduce this kind of tax that is going to affect consumer pricing, domestic production?” Simumba asked.

“Most Zambian suppliers to the mines will lose business because the mines will find it much cheaper to import. So, I don’t think this sales tax should be implemented. However, if the government is insistent on having this tax, then let them introduce it next year. At least there will be enough time for further consultation and it will give time for businesses to get ready with their systems of accounting. All companies in Zambia, when goods and sales tax come, will have to reduce their output – I can guarantee you that. There will be job losses!”

Simumba pointed out that Mwanakatwe was incompetent as a Minister of Finance.

“She is incompetent to run the Ministry of Finance. The reason, just one good example, is this year’s budget which is her first budget; that budget she only expects revenues of K56 billion. But she has gone ahead to plan to spend K86 billion,” Simumba said.

“So, from the starting point, the 2019 budget has a cash deficit of K30 billion. So, this year alone Mrs Mwanakatwe plans to borrow K30 billion just to keep the budget running and to be executed. That’s unacceptable and that’s pure incompetence! In a time when you already have 65 per cent of the GDP as debt, again in 2019 you are going to borrow another K30 billion…!”

Asked how the Zambian economy could be stimulated, Simumba answered that: “number one, money is the lifeblood of any economy.”

“If money is not in circulation, then you are not generating any output or growth. So, we need to ensure that money is circulating in the economy and it’s circulating in the sectors where we need it most to circulate. The mining and agriculture sectors are very important sectors. The manufacturing sector also [should be supported so that we have] exports because we need to get away from dependence on copper and bring in non-traditional exports,” he explained.

“When we say these things, we are not saying from without; there is experience involved. Most of the people working in this current government are people that I know personally and I have worked with them. So, when we criticitise, it’s not personal [but] because we want the best for this country.”

Meanwhile, Simumba indicated that he believed that most senior officials in the PF government knew that there were better ways of implementing economic policies than “what they are doing.”

“[But] the biggest difference between this government and the previous governments that we’ve had [is that] this government does not listen – it’s stubborn,” charged Simumba.

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