By FRANK MUKUPA
AN analysis of the sales tax bill has shown that Value Added Tax (VAT) is a better tax for Zambia, Centre for Trade Policy and Development (CTPD) has said.
CTPD researcher, Bright Chizonde, said sales tax implementation would lead to an increase in inflation rate higher than the projection rates done by the Bank of Zambia (BoZ).
He was speaking in Lusaka when the organisation launched the analysis of the sales tax bill.
“Sales tax will be collected at every stage in the supply chain meaning that this will trigger the cascading effect and lead to an increase in inflation,” he said
Mr Chizonde said sales tax would reduce revenue collection.
He said sales tax exemption list was forecasting on the import side, hence not solving most the inflation occurrence.
Sales tax, he noted, had provided exemptions from tax on capital goods, imports, designated basics and essential goods and services.
“The performance of VAT since 2017 has been above the projection made by Government and in the first quarter of 2019 VAT was above the projection made for the first quarter of the year,” he said
Mr Chizonde recommended that Government should look into modalities to revise the existing VAT Act instead of shifting to sales tax bill.
“Government should reconsider the implementation time frame to give more room for people to understand the sales tax,” Mr Chizonde said
Mr Chizonde said, the research showed that implementation of the sales tax would mean that at very point of sales, a tax would be collected and that would lead to price discrimination.
“Tax administration will be more difficult under sales tax because sales tax has no self-compliance operations,” he said
And Bankers Association of Zambia president, Leonard Mwanza, echoed that the implementation of sales tax would lead to increase in inflation rate, which would in turn lead to increase in interest rates, hence increase the cost of borrowing.
“Inflation will start moving upwards. The implication is that interest will start moving up, cost of living will go up and the cost of borrowing will also go up,” Mr Mwanza said.