• Higher tax rates can sometimes decrease the tax base.
• Ndola Chamber of Commerce looks forward to a National Budget that balances supply-side economics with demand-side economics.
• Capital gains should remain tax-free to encourage savings.
Ndola Chamber of Commerce and Industry says the 2023 National Budget should aim to minimize regulatory costs, statutory fees and excessive penalties that cause Micro, Small and Medium Enterprises (MSMEs) and informal businesses to avoid formalization due to the unbearable and unsustainable cost of compliance.
Speaking in an interview with Money FM News, Chamber President Paul Chisunka urged government to pay particular attention to tackling cost related bottlenecks in the business regulatory environment and completely move away from a high tax regime in order to reduce the cost of doing business and the cost of living.
Mr. Chisunka noted that high taxes and over regulation are a disservice to the country’s economy because they damage production and operational efficiencies of businesses which make goods and services expensive, thereby adding inflationary pressure and weakening the purchasing power of consumers.
“The Ndola Chamber of Commerce looks forward to a National Budget that balances supply-side economics with demand-side economics because we believe this will allow Zambia to realize economic growth while still providing government with sufficient revenue to fund the social sectors, fulfil our debt obligations, and attend to the needs of our people.”
“We propose that lower tax bands and policy incentives be introduced for MSMEs, cottage industries, and cooperatives. This will act as a countervailing measure against unfair competition and help to revive Zambia’s industrial base by promoting value addition and providing necessary safeguards to infant industries,” Mr. Chisunka stated.
He added that according to research, higher tax rates can sometimes decrease the tax base, which will lead to the decrease in tax revenues even if the tax rates are high.
Mr. Chisunka proposed a further 5 to 10% reduction in Corporate Tax to enable companies obtain favorable returns on investments, as this will turn the country into a noticeable competitive tax jurisdiction.
He suggested that Capital gains should remain tax-free to encourage savings, investments in government bonds, and to facilitate the easy mobility of capital, and exchange of assets within the Zambian economy, while the Pay As You Earn (PAYE) threshold should be increased by at least 50℅ and adjustments made to the subsequent tax.
“To offset subdued economic performance and achieve rapid industrialization which is needed to substantially increase our Real GDP, we recommend that government allows businesses to accelerate depreciation on selective capital equipment and machinery.”
“This will encourage companies to buy modern equipment and machinery, and increase the uptake of modern technologies, which will make Zambian industry more proficient in manufacturing high quality products and executing professional services that will contribute more revenue to the Zambian treasury through exports and domestic sales,” he added.
Finance and National Planning Minister is expected to present the 2023 national budget to Parliament on Friday this week.