Sales Tax may increase burden on poor, warns WaterAid

Finance Minister Margaret Mwanakatwe’s proposal to introduce the Sales Tax next year may increase the burden on the poor as investment in the water sub-sector could be discouraged, WaterAid Zambia has warned.

And WaterAid Zambia says the water sub-sector remains grossly under-funded, adding that the country needs to pump in around K3.8 billion per annum for the period up to 2030 to achieve basic targets.

Last month, Mwanakatwe told Parliament that government intends to abolish the Value Added Tax (VAT) and replace it with a non-refundable Sales Tax, which, according to her, is simpler to implement.

In a statement, however, country director Pamela Chisanga stated that Mwanakatwe’s proposal to roll out a Sales Tax from next year may increase the burden on the poor as investment in the water sub-sector could be discouraged.

“Some proposed taxes, such as Sales Tax, are likely to have a negative impact on critical services related to water, sanitation and hygiene, which are currently not exempt from VAT. As opposed to VAT, which applies only to the net increase in the price of a good or service from one seller to the next buyer, Sales Tax may increase the burden on the poor as the tax is imposed on the gross price at each point of sale. With the introduction of Sales Tax, there is a risk that this could limit investment in the sector, which is already low,” Chisanga stated in a statement reacting to the 2019 national budget.

“WaterAid argues that water is a social good and as such must be easily accessible to all by looking at key aspects of affordability in addition to other parameters. Water is also a basic human right and as such taxes that impede the fulfil of this right should not be imposed on the citizenry.”

And while she commended government’s K1.9 billion allocation to the water sub-sector next year, Chisanga complained that it is still grossly under-funded.

“From the current status, the Water Sanitation and Hygiene (WASH) sector remains hugely dependant on donor/ loan financing and the 2019 budget has not adequately addressed this. The K1.9 billion or 2.28 per cent of the national budget or 0.6 per cent of GDP whilst commendable, WaterAid notes that this allocation is financed largely through loans such as the US $135 million announced in March by AfDB to fund 12 districts in four provinces,” stated Chisanga.

“From our own analysis, we have ascertained that Zambia needs to make a minimal investment of about K3.8 billion per annum for the period up to 2030 to achieve basic WASH targets and about K16 billion per annum to reach safely managed WASH as per SDG 6 committed targets. At present investments are much lower in this sector and as such the sector has been unable to make strides in improving access figures for WASH.”

         

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