• This translates to significant lost revenue on the part of the Treasury.
• Last year, about US$1 billion dollars was not collected from the oil industry.
• In two years, the country may fail to collect about US$2 billion from the industry.
Energy Forum Zambia says the country is likely to lose about US$1 billion by the end of this year in form of revenue not collected from the oil industry due to government’s decision to extend waivers on Value Added Tax (VAT), Excise Duty and Customs Duty on imported petroleum products.
Forum Chairperson Johnstone Chikwanda told Money FM News in an interview that last year, about US$1 billion dollars was not collected from the oil industry and this year again, another US$1 billion is likely not to be collected, therefore in two years, the country may fail to collect about US$2 billion from the industry.
Mr. Chikwanda noted that computation of these taxes based on the current pump prices, translates to significant lost revenue on the part of the Treasury, a situation which could affect service delivery.
“On the downside of it this translates to significant lost revenue on the part of the Treasury because if you do computations of these taxes based on the current pump prices, you will find that by the end of this year, government will lose almost US$1 billion in form of revenue not collected from the oil industry.”
“In a full year when you do the computations, it’s about US$1 billion of those taxes not collected and this could affect service delivery in one way or another. That is why a way must be found of engaging the public and see how government can start collecting this kind of revenue from the industry,” Mr. Chikwanda said.
Mr. Chikwanda explained that the taxes were waived by the previous administration, and they failed to re-integrate them because of an uproar from citizens each time government wanted to take that route.
He stressed the need to relook at how the country will handle this kind of taxation on the petroleum industry.
“In 2021 again about US$1 billion dollars was not collected from the oil industry and this year again another US$1 billion is likely not to be collected, so in two years we are likely to fail to collect about US$2 billion from the industry. So there is need to rethink on how we are going to handle this kind of taxation on the petroleum industry,” he stated.
Mr. Chikwanda further said if VAT, Excise Duty and Customs Duty on imported petroleum products were to be re-integrated at once, the pump price would have gone up by more than 40 percent because VAT is 16 percent, while Customs Duty is 25 percent.
“When you add those two, the sub-total is 41 percent combined purchase and then there is Excise duty which was also waved completely on diesel and partially on petrol of which if you add them, you will find that there are coming to almost 45 percent.”
“Also tax of this has been waved which were to be reintegrated at the end of June so that was going to push the fuel prices by not less than 40 percent and surely that was going to be a lot, and perhaps the solution would be to re-integrate them in a phased approach to avoid such type of an astronomical charge should they be re-integrated at once,” he added.
Recently, Energy Minister Peter Kapala disclosed that Government will extend and maintain the current subsidies or tax waivers on VAT, Excise Duty and Customs Import Duty on petroleum products – which are in line with Statutory Instrument (SI) number 3 of 2022 and coming to an end on 30th June 2022 – for another three months up to 30th September 2022.
He said VAT and Import Duty will remain waived or zero-rated on diesel and petrol, while Excise Duty is waived on Diesel and reduced on petrol, while there is no tax regime on kerosene.
