TAX MEASURES PUT IN PLACE TO ENHANCE JOB CREATION ,PROMOTE GROWTH OF LOCAL INDUSTRY AND THERE BY IMPROVE GDP FOR ZAMBIA (2022 BUDGET ANALYSED ) -ARTICLE 3A
By Brian Chanda Financial and Banking Advisory Expert
A.BACKGROUND
1.In article 1 and 2 we established the Asset side of the Budget 2022, the Income side if you like.
2.To close off the articles on Income side of the Zambian Budget 2022 I have done article three(3).
3. In the two articles( 1 and 2) I established how 45% of the total Zmw 173 billion (US$10.2billion) budgets would be supported through ZRA tax collection.
4. I also noted several categories of taxes including Income Taxes (company tax, withholding tax and pay as you earn) ,Value Added Tax, Customs and Excise Duty and Mineral Royalty tax as making up the total tax income.
5.Article three details the tax measures being proposed to support growth and jobs creation , to support growth of local industries and to increase the tax base so that more tax is collected to finance budget programmes. Remember more performance and productivity is enhanced the more tax is collectable through the various tax categories.
6. There are three key tax measures taken in the 2022 budget
a.One approach is to encourage the creation of manufacturing Industries in particular industries by Increasing taxes that discourage importation of certain goods that can be manufactured locally thus improving productivity and creating more job opportunities.
b. To increase the tax base of tax collectable and strengthen controls to ensure tax is collected so that funds collected are used to fund the budget and growth.
c. The third approach is the reduction or abolition of several existing taxes to enhance productivity and performance thus improve job creation opportunities in those Industries.
7.A word of alert , the article is a bit on the technical side and slightly long but you can glance over the main headings to appreciate. Also keep yourself glued to the aim of the tax measures which I have highlighted in point 5 and 6 above
8. As there are three approaches I have split the article in to two the one you are reading is part A of article 3. This contains the first two approaches of increasing taxes to discourage importation and enhance local industries and increase tax base of certain sectors like the vehicles with high sitting capacity sector, printing sector, property and life Insurance areas to tap into potential taxable income).
9. Article 3b will tackle the third model which is to reduce or abolish certain taxes to improve capacity of various sectors and Industries to perform there by enhance growth ,business opportunities and create jobs
10. I have included as attachment to this article extracts of pages which discuss tax measures from pages 47 of the budget onwards specifically focusing on items 205, 206,207,210,211,220,221,222 and 223.
B. APPROACH ONE AND TWO
Increase duties and withholding tax to discourage importation of goods and services and encourage local industry existence and growth.
Increase tax base of certain sectors
1. Insurance Industry (see page 47 item 205 and page 48 item 210 of the budget for the year 2022)
a. To support the growth of local reinsurance a 20% withholding tax is to be placed on companies that reinsure with firms that are not registered in Zambia.
b.A quick explanation on Reinsurance (premiums received by Insurance companies are reinsured. The practice has been to reinsure with other insurance companies either locally or abroad. The reinsurance is cover in case the client makes a claim on asset which is damaged and is covered by the Insurance Company. This way the insurance firm has enough liquidity to settle with the client. Item 205 of the budget for the year 2022
c.To increase taxable base for VAT it has been proposed that the Insurance premium levy be abolished and be replaced by a standard VAT rate on property and non- life insurance
2. Transport and Acquisition of Vehicles Industry –Vehicles with a sitting capacity which is higher than 12 normally these are buses (see item 206 in the attachments)
a The tax applicable here is a presumptive tax band.
b. Presumptive taxes are normally applied n areas whose taxes are hard to tax and so bands are put to be able to access the tax income.
c. A vehicle with a sitting capacity of more than 12 has a higher presumptive tax band.
3. Printing and Press Industry (Booklets and Newspapers see item 210 of the budget 2022)
a To increase taxable base for VAT it was proposed that a standard rate applies to booklets and newspapers.
4. Tobacco and Cigarette Industry (see page 50 and 51 item 223 section c and d)
a Increase specific excise duty on cigarettes from the current Zmw 302 per mille to Zmw355
b.Increase specific excise duty on unmanufactured tobacco, tobacco refuse, smoking tobacco whether or not containing tobacco substitutes, water pipe tobacco and cutrag from ZMW 240 to ZMW 355.
5. Alcohol Industry (see page 50 and 51 item 223 section b)
a.Increase the specific excise duty on opaque beer to fifty ngwee per packaged litre and One Ngwee unpackaged
6. Coal Industry (see page 50 and 51 item 223 section a)
a.Introduce 5% excise duty on Coal
7. Ceramic Tiles production (see page 50 items 220 of the budget for the year 2022)
a.To promote growth of the Ceramic industry it was proposed that customs duty increases to 25% from 15% on floor and wall tiles imported from outside the COMESA and SADC regions
8. Cotton, Clothing, packaging Industry, (see page 50 items 221 and 222)
a. To promote local manufacturing in these industries it was proposed that customs duties on importation and surtaxes be increased or introduced on things not from SADC or COMESA region or such as
*yarn(cotton fibre-Google it to understand and see image of you are not in cotton industry)
*Knitted or crocheted jerseys, waist coats and similar articles
*Imported cement bagsImported glass on selected HS Codes
*Flexible Intermediate Bulk Containers
9. Casino, Betting and Gaming (see page 47 items 207)
a.To enhance tax compliance on betting, casino, lottery and gaming activities it was proposed that mandatory requirement for tickets to display the withholding tax payable on potential winnings.
b.Further this is a condition for holding licence whether operating online or through physical stores.
10. Mobile phone sales industry see item
a. Mobile phones tax collection point is proposed to be upon registration with ZICTA this increases the tax base as any new phone being registered will be accounted for tax purposes.
Article 3 B will focus on the proposed reduced or abolished taxes which promote productivity and easier way to do business in the sectors targeted thus improving productivity and creating more job opportunities and business opportunities.