Zambia’s Tax System Threatens to Disenfranchise SMEs – Chisanga Warns
Economic analyst Kelvin Chisanga has raised red flags over the current tax implementation models in Zambia, warning that aggressive enforcement strategies, particularly the rollout of the Smart Invoice system, risk marginalizing small and medium-sized enterprises (SMEs) and informal sector players.
In an exclusive interview, Chisanga noted that while the Smart Invoice initiative by the Zambia Revenue Authority (ZRA) is a commendable tool for enhancing compliance and broadening the tax base, its method of execution is causing distress among local businesses.
“Smart Invoice is relatively a good tax model to monitor compliance and foster strong tax fortitude,” Chisanga explained. “However, the current implementation is forcing Zambian businesses into difficult situations without first building the necessary trust and understanding among entrepreneurs.”
He emphasized that Zambia’s tax net remains narrow, with only a small proportion of the population actively contributing to government revenue. “We all know the tax basket has serious limitations, but imposing complex digital systems without adequate education or transitional support will only widen the gap between tax policy and citizen participation,” Chisanga stated.
According to him, only businesses with the infrastructure and capacity to fully adopt Smart Invoice technology are thriving, while others especially those operating informally are being pushed further to the periphery of the economy.
“This approach could undermine our domestic production and entrepreneurial growth,” he said. “Many businesses are still struggling with historical tax issues and lack a proper understanding of the tax system. They are now being punished by new tools they don’t fully understand.”
Chisanga also warned that some industries, like oil companies, are already raising concerns over the system’s impact on VAT claims and credit note complexities. “It’s creating operational friction where exceptions should be considered,” he added.
He further criticized the ZRA for failing to invest in tax literacy programs to ensure entrepreneurs understand which tax obligations apply to them. “Some small businesses are being wrongly taxed under complex regimes like income tax, which is both expensive and unnecessary given their scale,” he noted.
If left unchecked, Chisanga believes the current approach could disenfranchise thousands of Zambians and worsen poverty levels. “We’re heading towards a situation where doing business becomes a burden rather than a solution to unemployment and poverty.”
He called on the Ministry of Finance and ZRA to reconsider their methods and invest more in public education, transitional reliefs, and inclusive policy design. “Taxation should be a bridge to development, not a barrier to participation,” Chisanga concluded.
May 6, 2025
KUMWESU