The Zambia Revenue Authority (ZRA) tax refunds have jumped up by 12.3% year on year despite the earlier indication that tax audit of mines and related other entities would curb the drain.
Further, ZRA has failed to meet its K59 billion revenue collection target that was set for the 2020 financial year, registering K1.3 billion or 22 percent below the annual target.
This below target performance by ZRA is further exacerbated by the fact that the Zambian Kwacha has depreciated by over 60% within a year. Meaning that the Kwacha tax collections value has lost a further 60% of value or purchasing power internationally, if used to pay for US dollar or forex denominated government spend.
ZRA Commissioner General Kingsley Chanda said the authority collected K57.7 billion last year 2020, which represents 17.7% of the Gross Domestic Product (GDP) compared to 17.8% in 2019. The global benchmark for an efficient tax collection system is collection of 18% of GDP.
However, the ZRA Commissioner General defended his institutions performance stating that “the performance is highly commendable because revenue collection was a difficult undertaking in 2020 due to the unfavourable economic conditions that prevailed during the year including the outbreak of the covid-19 pandemic, which put a strain on public resources and economic activities”.
And the revenue target for 2021 has remained flat with no notable stretch added, largely maintaining the target that was set for 2020. ZRA has been given a tax revenue collection target of K59.3 billion for the year 2021 adding that it will be difficult to achieve its set target due to the continued effects of the covid-19 pandemic on the economy.
Chanda further clarified said this [below target] performance relates to taxes collected by ZRA only and does not include revenues collected by other government departments in form of non-tax revenue and other fees noting that the Ministry of Finance will at an appropriate time and in line with its mandate give a brief on the revenue collected outside ZRA.
Chanda said the authority paid out K12.9 billion in terms of tax refunds compared to K10.5 billion, which was paid out in 2019 representing a 12.3% growth in tax refunds adding that of this amount, K12.64 billion was paid in VAT refunds of which K8.5 billion was paid out to the mining companies.
He added that direct taxes refund stood at K72.3 million while K163.5 million was paid in customs refunds. He said the increase in the amount refunded in 2020 is in line with the authority’s desire to dismantle all its outstanding tax refunds especially VAT adding that this remains one of the key operational priorities for ZRA and government.
He said the fiscal incentives announced by the government, which were aimed at containing the spread of the virus and had put the economy on the road to recovery, had a chilling short-term effect on revenue mobilisation.
In response to the disruptions to the economic fundamentals, government revised its 2020 tax revenue projection downwards from the K59 billion, which was approved. Chanda said this during a media briefing that was held in Lusaka on January 13, 2021.
