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By JOHN SAKALA
Financial Consultant Clement Kayula has commended Government for dumping the Value Added Tax (VAT) system in favour of sales tax.
Speaking with The Independent Observer in an interview, Mr Kayula gave two reasons why the VAT system was unsustainable in Zambia.
He said that the complex administering bureaucracy associated with VAT led to a lot of loop holes.
He said of the loopholes were abuse and corruption, undeserving and forged input claims thereby giving tax authorities’ hard time to effect required control.
“Corrupt tax payers and rogue tax officials have been unfairly exploiting the VAT system and robbing off revenue from government. For example a tip of the iceberg for VAT insiders know how Fuel Filling Stations invoices have been abused for dubious VAT input claims, because administering sales tax is more straight forward manipulation is harder when compared To VAT,” he said.
Mr Kayula who is the financial and business analyst wondered what level of value addition is happening in Zambia to warrant value added tax.
He said the level of manufacturing that prevailed at the time of VAT introduction has since been eroded and therefore justifying discontinuing with this system.
“We as Zambia’s are now predominantly only buying and selling with isolated cases of value adding businesses. The new law can and should make exceptions or lower rates for those isolated businesses, of course with full justification and verifiable reasons.
“The major activity in Zambia is mining and as exporting businesses they are zero rated. Meaning they cannot pay input and not charge output VAT? They are refunded for any input VAT they incur. Why they were not merely exempt for VAT purposes is another reason why the system has collapsed. Furthermore mining houses have been religiously collecting input VAT for selfish reasons like they are government tax agents. Since when did private investors so keenly help governments anywhere in the world to collect tax? They have made it mandatory to only deal with VAT registered businesses so as to help themselves and not ZRA,” he said.
Mr Kayula said when RA started collecting output VAT straight from the mining houses on behalf of the contractors and suppliers by implication it meant they were administering sales tax.
He said direct input VAT claim repayments back to contractors and suppliers are never made by ZRA save for credits against other or future tax liabilities.
“The sum total of all this was that the VAT system had collapsed on its own. The big question is why did Zambia allow selfish people, by definition investors are selfish people, to be the center and drivers of the VAT system? The answer to that question has been grave consequences for our country in terms of government revenue losses.
“I’m imploring government to put its foot down and stick to Sales Tax which leaves little room for manipulation and no refunds. Nonetheless let’s make an orderly dumping,” he said.