Will ZRA undermine minister of finance over VAT?

Will ZRA undermine minister of finance over VAT?

*Kingsley Chanda must resign to preserve his little integrity

In July this year, Zambia Revenue Authority (ZRA) director General Kingsley Chanda wrote the article below in which he discredited the VAT system saying it has failed in Zambia and Africa at large.

This is in addition to various statements and campaigns that ZRA issued and undertook denouncing VAT in preference for sales tax.

Now that minister of Finance Bwalya Ng’andu has discarded sales tax even before it is being implemented, will Chanda and his ZRA faithfully implement VAT? We do not think so. The current ZRA and a lot of ministry officials are violently opposed to VAT. They, therefore can not be relied upon to discharge their duties genuinely using a tax system they don’t believe in.

Minister Ng’andu should be very careful. These ZRA, MoF officials will undermine him just to prove him wrong. This is about egos and ‘we told you’ scenario here. Definitely they will pretend and say we follow government policy, but it will be naive to trust these opponents of VAT tax to implement it. They have publicly stated their opposition to it.

If Ng’andu has to succeed, he will need to work with people he can trust to discharge their duties because they believe in the system they are using.

Kingsley Chanda and his team are not happy with VAT, do not believe in it. They can implement it dutifully but not faithfully.

Our advice to Ng’andu is, ‘watch your back’; those opposing you are in strategic positions including in cabinet. Crack the whip now.

See below how ZRA boss Chanda discredited VAT two months ago👇🏿

VAT HAS FAILED

By Kingsley Chanda
This is a policy issue and Ministry of Finance takes the lead. Zambia Revenue Authority (ZRA) as the implementing agency compliments that effort.

Given the misunderstanding and misgivings, you will see ZRA more active in this space.

The reality is that Value Added Tax (VAT) has failed not only in Zambia but in most African countries with narrow manufacturing bases which translates into minimum value addition.

A value added tax in an economy with limited value addition and a large informal sector is bound to fail and that is the exact complexion of the Zambian economy and VAT has effectively failed in Zambia.

So inevitably we ended up with an exponential refund exposure resulting in a low and in some cases negative net revenue uptake.

Any tax that does not contribute to the treasury positively is not a good tax and must either be reformed or abolished.

In Zambia we chose to reform VAT by combining all the good things about VAT and Sales Tax. We designed a hybrid tax that eliminated refunds but maintained the good attributes of VAT such as zero rating of exports and exemptions of essential sectors such as health, agriculture among others.

Am aware that the minister announced abolishing of VAT last year but if you read the sales tax bill, it is evidently a modification.

Unfortunately critics don’t bother to read the detail. This is not the 14th century sales tax. By the way, are you aware that some states in the USA are on sales tax, Canada among others?

This tax should be appropriately be referred to as GST (goods and services tax) so that we avoid the negative connotations of sales tax.

That be as it may, sales tax, when implemented properly, will achieve the following:

Support our local manufacturers
Eliminate government dangerous exposure to perpetual refunds which escalates domestic debt
Bring “loss” making mining companies into the tax net. At the moment they claim everything back
Expand the tax base by lowering the threshold and fiscalising retail outlets. This will make our traders in Kamwala and similar areas across the country to pay their fair share of tax. Under VAT, despite their turnover they only pay Turnover Tax. We target to capture an additional 1 million tax payers under GST.
Minimize transfer pricing and other tax leakages
Colleagues, my desire is to run an effective and efficient consumption tax regime because that is the best way we can ensure that every citizen pays tax.

When that is attained then we can progressively look at reducing direct taxes such as Pay As You warm and company income tax in order to increase disposal income of both citizens and companies thereby stimulating effective demand.

I know this is a long WhatsApp message on a Friday evening but I thought I must share these thoughts so that you have a synopsis of the rationale behind the proposed change.

Let us all support this necessary change no matter how painful it might be to those who have been syphoning government through fraudulent VAT refunds.

Remember there is no standard tax system for all the countries on earth. You can and you must customize a tax system to suit your unique economic realities.

The Writer is ZRA Director General

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COMMENTS

WORDPRESS: 3
  • comment-avatar

    I love the advice to Ng’andu , ‘watch your back’

  • comment-avatar
    shu shu shu 2 weeks ago

    If the zambianwatchdog believes that we should all agree and that noone should hold an opposing view then the UPND should close shop and agree with the PF.

    • comment-avatar
      Nyambe the Hero 2 weeks ago

      You are either mentally retarded or unable to read or very childish and petty.

      They are giving Bwalya N’gandu friendly advice. If they economy is trashed further by these cartels everyone will suffer even more regardless of which party you support. Zimbabwe didn’t just happen.