The Zambia Association of Chamber of Commerce and Industry (ZACCI) has warned that the proposed Sales Tax, coupled with delayed payments of Value Added Tax (VAT) refunds, will force companies to lay-off workers in a bid to remain viable.

In an interview, ZACCI president Michael Nyirenda said that the introduction of the Sales Tax next April will lead to companies in the private sector restructuring and laying off workers in a bid to remain economically viable and profitable.

“…That’s number one. So, when you come to people, downsizing, reducing the number of people because of the introduction of Sales Tax, that is more reactive. Government, however, still needs to pay for those they owe, and they don’t seem to be committed to that. So, [they] still need to find that money and pay because it’s due. They cannot run away from that, but, of course, the more they delay, the reaction is that small-scale companies, even bigger ones, will fail to operate. And, unfortunately, when it comes to that, the victims are employees; we might see companies laying off workers,” Nyirenda said.

“The point is this: for us, from a business sector, the tax called VAT is actually better than the tax called Sales Tax. The reason is that VAT is claimable; it’s not an added cost to business; it means I pass it on to you who is going to consume my goods. So, I don’t have to factor it in my business. Now, for Sales Tax, you will add it to your costs. So, if you want to add my tomatoes, then you must add whatever figure to the price of tomatoes so meaning that the price increases. Now talking about VAT Refunds, that’s a management issue. Believe you me, Zambia is an icon in terms of manging VAT in the region!”

Nyirenda added that ZACCI still did not understand why government insists on re-introducing Sales Tax, and wondered what went wrong with VAT for the whole system to be scrapped.

“But I was also saying that for us from a business sector, unless they can really show us where the challenges are, if ZRA (Zambia Revenue Authority) can explain, we think VAT is so much better. It’s just an issue of how you manage the VAT. Where do you put the money? If you put money from VAT in Control (Account) 99, then it’s a problem because it can be used for other things. It’s not a secret, but if you put in a VAT Refunds Account, then it will not be used for anything else, but refunds, because people pay in and you must also pay out. When it started, I used to receive cheques from the post office from ZRA. Now what has happened? I am a living example; I would come to the post office for my claims. But also, they will send you their claims in terms [of] where you need to pay. And that was very beautiful when it started so where have we gone wrong? They need to show us where things went wrong. But also, one thing we note is because all the money is being put in Control (Account) 99, then it’s used for other things and not VAT refunds and it has been difficult for them to separate that money,” explained Nyirenda.

Government is set to re-introduce Sales Tax as proposed in the 2019 national budget from April 1 next year, despite stiff resistance from a broad range of stakeholders, in a bid to avoid paying VAT refunds, especially to mining companies, who are still owed around US $600 million, a situation that has strained government coffers.