THE Economics Association of Zambia [EAZ] says there is need to interrogate the tax management system and administration to establish why there is low compliance and so much evasion.

And EAZ president Isaac Ngoma says while the current mineral royalty tax may work, it needs to be re-looked once mining operations in the country are at full capacity.

Last week, Zambia Revenue Authority Commissioner General Dingani Banda revealed that only 702 out of 500,609 active taxpayers contributed 80 percent of the gross revenue collected in the first half of 2023.

Commenting on this in an interview, Monday, Ngoma said there was need to find out whether the mechanisms and strategies which ZRA was employing were effective enough to enhance compliance and increase revenue collection.

“If you look at the ratios, the numbers are very low, we need a very pragmatic approach to taxation. The President is on record on some of the challenges that he has also observed in our tax management system, tax administration. I think this is something that we spoke about even ourselves in our paper [that] we need to interrogate the issues surrounding taxation – why is compliance low. Why is it that there is so much tax evasion and avoidance? Then we need to find out also as to whether the mechanisms and strategies that ZRA is employing are effective enough to enhance compliance and increase on collection, “he said.

“Technically, we need to broaden the tax base but the issue is on how and what needs to be done, what needs to be done and how it should be done. We hope that we can have proper dialogue between ZRA and the private sector and broadly speaking, the taxpayers during the forthcoming EAZ economic summit. Then secondly also, how many people are participating or are contributing to the taxes that are being collected, essentially what we are seeing is that the informal sector is not contributing as they should. And there is a lot of business that is being done informally now. Business has become more informal and that is worrying. But at the same time also, we need to increase on economic activities; we need to increase on productive businesses that should be tax compliant”.

Ngoma called for the simplification of tax administration by reducing tax rates in certain areas while increasing the number of contributors.

“Tax payment should not be confined to a small number as it is now, it needs to be broadened. The best approach is to simplify tax administration, look at areas where we can reduce the tax rates but increase on the number of taxpayers. Areas that need to be looked at include withholding tax on properties. A lot of people are landlords but do not pay their fair share of taxes. So if that can be managed properly, and it can be done alongside the local authorities and also employ digital means and use specialised collection agents, things can change. We need a well-structured public private partnership in areas of collection, but then we need also a system to ensure that there is conformance from both the collector and the payer. And there must be those that will monitor and check the effectiveness of the system,” he said.

And Ngoma said while the current mineral royalty tax may work, it needed to be re-looked once mining operations were at full capacity.

“I think with regards to the mines, there is also need for engagements even as we work on ensuring that we revive our fortunes or we ensure that there is investment in Mopani and Konkola Copper Mines we should also look at mining taxation. The mineral royalty, with all the good intentions, it was well thought out. It may work for now but we should relook at it in a broader [sense]. When all the mining operations are on stream and operating at full potential, we need to maybe review and see whether we are getting optimum returns. Because right now, it is primarily looking at North-Western Province but once we get the whole Copperbelt – Mopani and Konkola operating, all other secondary mines are taken into account we need to relook that. Even the sub sector – the gemstone, we need to review that so that there is a fair tax regime that is going to ensure that the Treasury is not deprived,” said Ngoma.