Johnstone Chikwanda-FEIZ
Energy Expert
There has been alot of conflicting statements from different angles that there are no fuel subsidies in Zambia at the moment while others are saying there are still fuel subsidies.
The correct position is that Government is still subsidising fuel in form of waived 16% VAT, 25% Customs Duty and Excise Duty. When you add these taxes they are over 41%. These taxes were suspended by previous Government in order to suppress the pump prices upto 31st December, 2021. Therefore, on 1st January, 2022 the fuel pump prices were supposed to increase by more than 41% but New Dawn Government decided to extend the tax waiver to 30th June, 2022.
Lost revenue collection to the treasury by previous Government in 2021 alone was in the range of K17 billion or $1 billion in one year.
From January 2022 to 30th June 2022, the New Dawn Government will not collect approx K9 billion from the oil industry because of these waived taxes. Should they extend the tax holiday to end of year, New Dawn Government will not collect at least K18 billion or $1 billion from the oil industry. This will affect alot of things. These taxes are supposed to be collected by ZRA. The oil industry is the cash cow.
This is why for now a Governement to Government fuel procurement arrangement with a major oil producing country is the best route to manage the monthly price challenges and to start taxing the industry once again without shoting the pump price by over 41% when the waivers lapse in June 2022.
No one knows when the war between Russia and Ukraine will end. Even if the war ended with Russia winning, sanctions will remain in place. It is these sanctions which are creating challenges. Even if Ukraine won the war, the sanctions will still remain of place because of their overall intention.