• Tax revenue mobilization is of paramount importance to Zambia’s budget financing.
• The first half of 2023 has been characterized by unmet tax revenue targets.
• There is urgent need for ZRA to expand its reach into the informal sector.

Centre for Trade Policy and Development (CTPD) has urged Zambia Revenue Authority (ZRA) to enhance its tax administration and enforcement capabilities to strengthen revenue streams and bolster performance of underperforming tax categories.
Centre Public Finance Management Researcher, Matrina Mumba said this is in view of the 6.3 percent decline in tax revenues recorded in the first half of 2023 as recently reported by ZRA.
Ms. Mumba stated that there is urgent need for ZRA to expand its reach into the informal sector, by encouraging its transition into the formal sector although the high fixed entry costs into the formal sector serve as a deterrent.
She said tax revenue mobilization is of paramount importance to Zambia’s budget financing because it reduces dependency on external sources of financing, noting that despite this foresight, the first half of 2023 has been characterized by unmet tax revenue targets.
“According to the Zambia Revenue Authority (ZRA), in the first half of the year, tax revenues declined by 6.3 percent of the target compared to the same period in 2022. Differences were observed across four taxes.”
“Furthermore, the net collection of taxes during this period registered a 7.7 percent decline, primarily attributed to a reduction in direct taxes. This downturn is chiefly attributed to reduced output in the mining sector, among other factors, which has adversely impacted the collection of key taxes, such as company taxes,” Ms. Mumba noted.
She urged government to take deliberate steps to eliminate the entry barriers into the informal sector as a means to augment tax revenue.
According to recent data released by Zambia Revenue Authority, Company tax declined by 29.1 percent, while Mineral royalty declined by 23.2 percent, customs duty by 13 percent and domestic Value Added Tax (VAT) recorded a decline of 6.8 percent in the first half of 2023.
Within the same timeframe, VAT on imports, Pay-As-You-Earn (PAYE), and withholding taxes emerged as the top three contributors to total revenue, accounting for 21.1 percent, 20.1 percent, and 10.1 percent, respectively.
“While this signifies an increase from the previous year, it also underscores an overreliance on formal sector taxation,” she said.
Meanwhile, Ms. Mumba said the Centre expects government to allocate substantial resources to key sectors, such as education and healthcare in the 2024 national budget which will be presented to Parliament later this month.
“As the 2024 National budget looms, with presentation slated for this month, CTPD anticipates substantial allocations to key sectors, including critical areas such as education and healthcare. This accentuates the urgency of resource generation”
“To this end, the government should expedite the process of finalizing on investors to invest in the mines that are currently not operational, ensuring it can operate at full capacity and make a substantial contribution to the revenue pool. Additionally, the ZRA must bolster its tax administration and enforcement capabilities to fortify revenue streams and enhance the performance of underperforming tax categories,” Ms. Mumba stated.