The success of the soon to be implemented General Sales Tax (GST) is largely dependent on implementing agencies ensuring that they minimize the cascading effects that could result along the value chains of goods and services as well as ensuring the sufficient time is allotted to the implementation process, according to ZICA President Jason Kazilimani.
At their second quarter press briefing held in Lusaka, the President of the ZICA provided an elaborate background to his association’s engagement with Government through the Ministry of Finance as well as submissions the association had made to ZRA regarding the soon to be introduced tax.
“The Institute took time to analyze the Bill and shared its position on the possible impacts of the proposed Sales Tax Bill with the Government through submissions made to the Zambia Revenue Authority Technical Committee on Sales Tax and to the Joint Parliamentary Committee on Budget and Economic Affairs, Trade and Labour Matters of the Parliament of the Republic of Zambia”, said the ZICA President at a media briefing held in Lusaka on 13 June 2019. “Additionally, members of the Institute had the privilege to engage with the Minister of Finance on the Sales Tax Bill at the Institute’s 34th Annual General Meeting on 25th May 2019 in Livingstone.”
The institution acknowledged the efforts made thus far in terms of stakeholder engagement and applauded the Minister of Finance’s combined efforts the tax authority on the sensitization of the general public on the new tax bill that would see the epilogue of VAT in Zambia and the introduction of Sales Tax as the new tax regime.
However, through ZICA’s mandate to serve as an advisor to the Government on matters relating to the economic development in Zambia, it is not surprising that the aforementioned concerns needed to be raised as actors in the economy wait with anticipation on the roll out of the new tax regime. Based on the speech that was delivered, it is clear that the analysis conducted by ZICA identified the key motivator of the introduction of the new tax as it relates to revenue mobilization for Government but also pointed out the significance of a well-designed Sale tax and its potential for spurring local production. “The Institute is cognisant of the fact that a well-designed Sales Tax could potentially spur local production and also lead to higher revenue for the fiscus”, read the speech that was delivered.
On the cascading effect, ZICA hoped for a minimal effect as the current form of the 2019 Sales Tax Amendment Bill could result in the escalation of the price of goods and services through the cascading effect of sales tax along the value chains of goods and services. This, the association pointed out, was due to the lack of refunds on tax credit mechanisms imbedded in the Sales Tax mechanism. This would therefore have the unwanted effect of increasing the prices of goods and services by whatever rate that is finally legislated. One remedy to this though will be the effective collection of data on sales tax exemption schedules which requires rigorous engagement of key stakeholders. The association further puts forward a proposal that in the event that a single rate is hard to come by, a minimal impact rate not exceeding 5% should be set for locally sourced goods and service to reign in the ripple effect that may ensue.
Timely implementation was also another key issue that would impact the successful implementation of GST. The effective date of 1st July 2019 or any other date within 2019 does not appear feasible to the accountant’s body. The roll out of a new tax regime requires time as there are many interdependences to consider. ZICA pointed out the issue of re-configuring firm and institutional system for them to be Sales Tax compliant. They therefore proposed 1st January 2020 as the roll out date which would coincide and align the effective date to that of the new budgeting year making it easier for budgeting and forecasting with known Sales Tax rates.