Zambia Revenue Authority (ZRA) Commissioner General Kingsley Chanda says the country’s revenue collection will be greatly affected if the political crisis in Zimbabwe degenerate into chaos because most of Zambia’s imports and exports transit through that country.
And Chanda says government, through ZRA, has paid K6.4 billion as VAT refunds this year; 51 per cent of which went to mining companies.
Responding to questions from journalists at a media briefing today, Chanda said although business had not been affected since the Zimbabwean army took over on Tuesday, there was cause to worry if the situation degenerated.
“Towards the end of my written statement, I did speak about some concerns at some borders but what is interesting is that the volume of traffic at Chirundu, Victoria Falls and Kariba have not been affected. So far it has been business as usual and so at this particular point in time, we feel that this might not be a risk if the situation continues as it is. But if it changes, you are right. We are likely to have some negative impact because Chirundu is our major entry point into Zambia from South and over 60 per cent of our imports come from South Africa so that can take a very serious toll on our revenues but so far the situation appears to be normal,” said Chanda.
And Chanda dispelled speculation that government was not refunding VAT.
“There has been speculation on refunds, that ZRA is not refunding VAT in order to boost their performance and appear as though they are performing when in fact they are sitting on refunds. We have tried as much as possible to ignore these statements but we have reached a stage where we have to respond and provide details. Under normal circumstances, we hesitate to discuss tax matters of our tax payers because this is confidential information but when we are faced with a situation like this, the authority has no option but to provide the details to the public,” he said.
“As at today, 18th November 2017, ZRA has paid a total of K6.4 billion in VAT refunds, out of which, 51.2 per cent is for the mining sector. The total outstanding VAT refunds payable to the sector currently stands at K1.2 billion. What this means is that we have refunded K6.4 billion from 1st January 2017 to end of October 2017 but we still owe the mining companies K1.2 billion in verified refund claims. We also have a further K4.8 billion in unverified refunds.”
He explained that some of the VAT refund claims were not genuine.
“It is important however to note that before refund claims are paid, the Zambia Revenue Authority always carries out credibility checks so that the authenticity of these claims is ascertained,” Chanda said.
Meanwhile, Chanda revealed that mining companies owed government K14.6 billion.
“Let me also indicate here that apart from the amounts of VAT that ZRA is owing mining companies, mining companies are also owing the Zambian government through Zambia Revenue Authority assessments to the tune of K14.6 billion. These assessments are on account of VAT Rule 18. I know most of you have been asking me about what is happening to withheld VAT on account of withheld VAT Rule 18 which are basically 2013 and 2014 transactions. So on account of VAT Rule 18, the mining companies are owing the Zambian government through Zambia Revenue Authority assessments to the tune of K14.6 billion. Further, the mining companies have assessments worth K3 billion. These assessments have arisen from invalid claims and unfortunately in some cases fraudulent claims,” he said.
“The net position therefore, if you take out what we are owing the mining companies and what the mining companies are owing the Zambian government, is that the mining companies are owing K11.8 billion in unsettled tax assessments. We continue to engage individual mining companies on these assessments and we are optimistic that we will resolve all the outstanding issues including some of the objections that they have raised. And we will do this on a company to company basis. We do not believe that tax matters must be dealt with at an industrial level. All our actions are intended to protect government revenue and eradicate fraudulent refund claims and associated revenue leakages. We would also want to assure the business community that with the new system of collecting VAT at source, the Zambia Revenue Authority is generating adequate revenues to service all legitimate refund claims.”
He boasted that owing to the tax collection reforms, the authority had implemented, revenue collection has exponentially increased.
“With the reforms that we did in the collections of VAT in this country, you will be amazed to learn that the collections of VAT on goods and services has increased by 6913% for the period January to October 2016, the total collections for VAT was K61.2 million. For the same period, January to October 2017, we have collected K4.2 billion. This is largely because of the changes that we did to the collection of this tax. At the moment we collect it at source and therefore compliance has increased,” Chanda said.
“But at the same time we are also commiting to ensure that those that are in the refund position, because you can see that our liquidity position has increased significantly, so therefore we should have no problems to refund legitimate claims. However, only tax payers with no outstanding tax assessments will be paid. All tax payers that are owing ZRA must ensure they pay what they are owing or agree on some payment arrangements whether it is time to pay agreement or offset agreement before we consider them for any refund. If there are any objections, and I mean legitimate objections, my commissioner is here to resolve those objections. Let me emphasise again that the liquidity we have talked about is not just supposed to give government additional tax revenue. It is also supposed to refund those that are due for refund.”
He said ZRA was paying an average of K644 million in VAT refunds per month.
“In terms of figures, we are refunding in 2017, an average of K644 million per month, that is just the average, it fluctuates. This is about $64.4 million per month. In some months, however, we have refunded up to K800 million, this year alone. For example, in the month of November, this month in the first week of this month, we have refunded K731 million . Over 50% of this money goes to the mining sector . We expect to refund an additional K300 million before the end of this month which will bring the total to over K1 billion (US$100 million). The Authority however, despite all this revenue refunds, to legitimate claimants, is very optimistic that we shall meet our 2017 target . We are just worried about a few negative activities at some of our boarders which we hope will not affect the flow of traffic into Zambia I thank you,” said Chanda.