ZAMBIA Revenue Authority commissioner general Kingsley Chanda believes that the best way to tax a population is through consumption because “consumption is controlled by the consumer.”
Chanda, however, indicates that he does not support higher direct taxes because they are “toxic” to taxpayers.
Meanwhile, Chanda says the anti-smuggling team of the Zambia Revenue Authority (ZRA) was changed three weeks ago because an aspect of boredom crept into it.
Chanda, on ZNBC TV’s Sunday Interview programme, revealed that the biggest payer of tax in Zambia was the retail sector.
He said over 80 per cent of the Authority’s tax collections were coming from the retail sector.
“But that doesn’t mean [that] the mining sector is insignificant. It is very significant in terms of employment, in terms of forex (foreign exchange) and so on. But in terms of tax contribution, the mining companies can do better,” Chanda said, with a ‘clarification’ that sales tax is not designed to make business in the mining sector expensive.
“It’s only fair that the mining sector starts contributing equitably to the treasury. There are a lot of projects that are going on from which the mining sector benefits. Roads, health, for example, are areas where the mining sector directly benefits. So, it is only fair that the mining companies in this country start contributing fairly to the tax base. Surely, declaring losses for 16 years, 17 years but at the same time announcing huge project investments and so on is contradictory. There’s no reasonable shareholder who would approve an investment of two billion in a loss-making business.”
He explained that the government’s tax reforms like introduction of sales tax, in place of VAT, were designed to make every citizen and every corporate in the country to contribute to the tax base.
“As a citizen, I feel that the best way to tax your population is through consumption because consumption is controlled by the consumer. I’ll give you an example; if you take alcohol, you pay VAT [and] you pay excise on alcohol,” Chanda noted.
“So, if you choose not to drink that alcohol on a given weekend, you don’t pay that tax. [But] if you choose to drink alcohol every day, you pay that tax.”
He added that he did not support higher direct taxes.
“Higher direct taxes are toxic, even politically. When you pay somebody K10,000 as a salary and then you go back and get 40 per cent of that as tax and they go home with K6,000, it’s annoying. Isn’t it?” Chanda said.
Asked by the programme host, Grevazio Zulu, if he thought Zambians were paying too much taxes, Chanda insisted that the “strategy” was on taxing consumers.
“The strategy is that when we improve on our collection of consumption taxes…. And as I said, it’s the best way of taxing a population because everyone who consumes anything that is taxable, pays tax. That is the beauty of consumption [tax],” he explained.
“Sales tax will actually increase the tax base because through consumption, except for goods that have been exempted…. Mealie meal was not subject to VAT, it was zero-rated and it is still zero-rated under sales tax. All the baby foods, medicines, agricultural inputs; everything that was zero-rated under VAT will still be zero-rated under sales tax. Just as exports are not taxed under VAT, they will not be taxed under sales tax.”
Chanda further indicated that the only tax that mines paid was mineral royalty tax.
“In terms of 2018, for example, the mining sector’s total direct contribution to GDP was 2.3 per cent of GDP. When I say direct contribution, I’m not including the Pay As You Earn that is paid by their employees,” Chanda highlighted.
“In terms of our total tax collections, they only contributed 13 per cent. Now, that is your major economic activity…. Of course, there are other spill-over effects in terms of employment, suppliers and so on. You cannot dispute that! But as a direct contribution to the treasury, that is what the mining companies pay.”
He linked the low taxation contribution of mines to the way Zambia’s VAT was structured.
“But this (sales tax) also applies to other exporters. Just fixing the VAT issues in the mining industry was not going to be adequate – it is important that we do it throughout the economy,” Chanda said.
“One advantage that this sales tax will do is that it will expand the tax base – you are going to have more people getting into the tax net.”
He further likened sales tax to a hybrid.
“We have not abandoned all the good things in VAT; they are still there. What we have done is to bring in measures to stop revenue leakage,” he said.
Asked about the ZRA’s status regarding the payment of VAT refunds, Chanda responded that: “we are paying huge sums.”
“I mean, so far, as at end of March, we paid K1.5 billion in terms of VAT refunds. We’ve in the first week of May… K650 million and we hope with the authority from the Ministry of Finance we may pay slightly more,” Chanda revealed.
“On average, we do K850 million every month in terms of refunds. So, we’ll continue to do that. Once verified and accepted, we plan to pay all those refunds.”
Meanwhile, Chanda pointed out that the ZRA was “definitely winning” against the vice of smuggling.
“We made a mistake by keeping the same anti-smuggling team for a long time. I wouldn’t say that our officers got compromised but they became bored with their job and maybe there was an issue of over familiarity which started contributing to the leakages,” said Chanda.
“But three weeks ago, we changed that team completely, we’ve even changed management of the team and the response was immediate. Smuggling is a criminal act!”