Former finance minister Felix Mutati says Zambia needs a comprehensive tax policy review so that stability can be attained because inconsistency creates lack of confidence among citizens.
And Mutati says the withdrawal of the Sales Tax Bill shows that government us willing to address the fundamental concerns that were raised by various stakeholders.
Last week, Finance Minister Dr Bwalya Ng’andu withdrew the Sales Tax Bill (N.A.B Number 7 of 2019) from the House saying he hoped to re-introduce it in September after further consultations.
Commenting on this in an interview, Mutati, who is also MMD faction president, said there was need to review our tax policy.
“We must take an opportunity to undertake a comprehensive review of our tax policy because within the context of our tax policy, there are a number of distortions. We need to address the minimization of tax collection. We need to be able to say ‘some of the taxes that have been with us for a very long time, one of which is VAT [which] has been in existence for 25 years and clearly it has gone through a number of challenges. The question we should ask ourselves is that ‘is it dealing and resolving the administrative challenges that we need to undertake now?’ Is it refinement of the tax?’ or ‘is it the change of taxation that we need to do?’ I think we need to take that approach which is sustainable for a longer-term. Attempting to tinker around with tax policy on an annual basis creates a loss of confidence. So for me, I would advocate for a comprehensive tax policy review which the minister should take advantage through the experience of the start-stop that has been characterized with the Sales Tax,” Mutati said.
Mutati said government also needed to review the mining tax regime.
“It’s not only Sales Tax [but] it is also other tax elements including the mining tax regime. As you know, one of the accusations that have been leveled is the frequent changes in the mining tax regime and everybody has been calling for consistency. It is a time that those type of issues, we can begin to address them and this is a good opportunity going forward. So I think, for now, let’s give him (Dr Ng’andu) a benefit of doubt that what comes out is something that responds not only to the concerns that were raised by the various stakeholders but also responds to the issues around tax collection, around efficiency around elimination of distortions including tax leakages,” he said.
And Mutati commended government for withdrawing the Sales Tax Bill saying that proved that stakeholders’ concerns were taken into account.
“The withdrawal of the Sales Tax is a prudent decision and provides a sigh of relief not only to the business community but also to the consumers as it eliminates the uncertainty that was surrounding the introduction of the Sales Tax. I think the approach that has been taken reflects that government is not only listening but is also taking practical steps to address the fundamental concerns that were raised by various stakeholders on the impact of Sales Tax on business, on jobs, and also on the economy. And I think this is the approach that must always be taken because it is essential in building the trust between government and the business community,” Mutati said.
“We must take tax policy as a development too which will motivate investment, business innovation, business expansion, create jobs and answer to the fundamental challenges that we are facing in the economy by minimizing the stress. The bottom line is that we must always ride on the philosophy of ubuntu (humanity), talking to each other [and] listening to each other. That is the only way we can be able to build the economy of Zambia and what has been done to withdraw is the first practical step. And we want to see the implementation of whatever decision will come out of the withdrawal that has been undertaken.”
Mutati advised his successor Dr Ngandu to continue with a consultative approach before presenting the 2020 budget.
“And we want to encourage particularly the minister, that for the 2020 budget, this should be the approach that he takes, listening to the people, consulting the people. There is merit in collective wisdom,” advised Mutati.