The Sales Tax Bill will give Finance Minister Margaret Mwanakatwe too much discretionary power to decide who gets taxed compared to who will be exempted, says Deloitte Zambia.

But Zambia Revenue Authority (ZRA) Commissioner-General Kingsley Chanda has complained that government is grappling with huge VAT refunds, averaging around K1.4 billion payable per month, hence one of the key reasons to discard the VAT system.

Speaking during a Sales Tax consultative breakfast meeting in Lusaka, Monday, Deloitte Zambia senior tax manager Kennedy Munyandi observed that the Sales Tax Bill gave Mwanakatwe too much power to decide who gets taxed compared to who will be exempted.

The Goods and Services Tax (GST) rate will be pegged at 16 per cent on all imported goods into Zambia, while the rate on domestic services supplied within the country will be nine per cent, according to the Sales Tax Bill, 2019, expected to be enacted from July 1, this year.

“My first comment is on the readability of the Bill; there is much that needs to be done to improve the readability of the law itself to make it clear. My second comment is the concern about the discretionary powers given to the Minister; the law itself is about 34 pages; the Minister is mentioned at least 15 times! That’s already an indication of too much power given to a person; laws should not depend on the goodness of an individual, but you must have good laws,” Munyandi cautioned at the Taj Pamodzi Hotel.

“You might have a good Minister now, the following day, you may not have a good Minister. So, the discretionary powers are too many.”

He outlined that Section 34 of the Bill revealed the excessive discretionary powers to be handed over to Mwanakatwe.

“One particular issue regarding the powers of the Minister is Section 34, which is the waiver of taxes at the recommendation of the Commissioner-General, the Minister might waive the Sales Tax that is payable. I think that might be against Article 199 of the (Republican) Constitution where if tax is supposed to be waived, the Minister is supposed to do that through a Statutory Instrument (SI) and then that SI is supposed to be tabled before Parliament. So, they need to look at Section 34 and see that it’s in line with the Constitution,” advised Munyandi.

But speaking earlier, Chanda complained that government was grappling with huge VAT refunds, averaging around K1.4 billion payable per month, hence the need to discard the current VAT system.

“As I said, we had an escalation of refunds, and just to illustrate this: immediately the Minister (Mwanakatwe) announced that we were going to abolish VAT and introduce a non-refundable Sales Tax, the refund claims shot from an average of K774 million per month to K1.4 billion! At the moment, that is the exposure that Zambian government has in terms of VAT,” disclosed Chanda.