• While ZRA has yet again exceeded the quarterly target, there are some areas worth noting with concern
• Underperformance of indirect taxes reveals the need to enhance collection mechanisms.
• It is of concern that the consumption based taxes have not performed well despite the improving macro-economic environment.

Zambia Tax Platform (ZTP) has urged Government through Zambia Revenue Authority (ZRA) to expedite its efforts of developing enhanced processes and technology including personnel to aid the efficient collection of indirect taxes.

ZTP Social Economic and Investment Monitoring Analyst Peter Mumba added that ZRA will need to strengthen its enforcement towards the use of electronic fiscal devices to fight tax evasion and non-compliance by businesses that are registered for VAT.

Mr. Mumba explained that the Authority should continue conducting activities aimed at tightening border operations to limit smuggling which will improve collection of custom duties as smuggling of goods across selected porous borders has remained a challenge.

“Enhancing revenue collection requires a solution that addresses the challenges that the country faces in mobilizing tax revenue,” he said.

He explains the underperformance of indirect taxes reveals the need to enhance collection mechanisms unlike direct taxes such as corporate income taxes and pay as you earn (PAYE), indirect taxes tend to require more skilled and specialized methods of collection, “they are also prone to tax evasion through schemes like trade mis-invoicing and non-submission of VAT.”

Mr. Mumba added that the changing nature of economic transactions that are now often happening through technology even make it harder to collect taxes from certain transactions, let alone fight tax evasion.

He further stated that while the revenue authority’s performance is encouraging in its efforts to meet the overall revenue target for 2022, it is of concern that the consumption based taxes have not performed well despite the improving macro-economic environment.

“Economic growth registered by the end of 2021 was 3.6 percent. Copper prices have risen, averaging US$10,400 and inflation declined averaging 14.1 percent in Q1,” he noted.

Peter Mumba further said the poor performance of consumption based taxes may be pointing to constrained budgets that citizens are faced amid the rising costs of living.

He cited Jesuits Centre for Theological Reflection (JCTR) that disclosed the cost of leaving for a family of five as measured by the basic needs and nutrition basket rose to over K9, 000.00 for a family in Lusaka.

“Recently, the domestic economy has been characterized by sky rocketing prices of petroleum products which have sent transportation costs on an upward trajectory,” said Mr. Mumba, highlighting that this has had adverse effects on the spending patterns of the already constrained pockets of the citizens.

He commended Zambia Revenue Authority for exceeding the set target for quarter one on Tax Collection with a net of K1.3 billion tax revenues in excess of the K21.1 billion target that was set for the 1st quarter, comparatively, in 2021, net tax revenues collected in excess of the target for the first quarter was K2.9 billion albeit the target was lower at K14.billion.

“While ZRA has yet again exceeded the quarterly target, there are some areas worth noting with concern,” said Mr. Mumba.

According to the Zambia Tax Platform Social Economic and Investment Monitoring Analyst, “Tax revenues collected from Value Added Tax (VAT), Customs and Excise duties were all below target by 11.3 percent, 16.7 percent and 15.3 percent respectively. Income taxes amounted to 63.9 percent of total tax revenues, an indication that the country relies heavily on direct taxes.”