Felix Mutati

MMD faction leader Felix Mutati says the sales tax bill requires significant panel-beating for it to be workable.

Speaking when he met business and good governance activists at Protea Hotel in Chipata on Saturday, Mutati, who was accompanied by his faction officials, warned that the sales tax risked compromising the 2019 tax collections.

“The problems for the economy are many but the key issues are on how can we address and minimise the stress that the economy is going

through and how we can respond to the pressures of debt, issues around the liquidity that provides the oxygen for business to grow and run,” he said. “How we deal with issues around the inflation rate, depletion of the reserves that are critical to the economy, and for me, I believe we have a chance to develop the country for no challenge is insurmountable. And no situation lasts forever.”

Mutati, a former finance minister, said there was always a season for everything and “in addressing our challenges, unless you engage and consult with the business community when you are dealing with tax implementation, it becomes a challenge.”

 

“The migration from VAT to Sales Tax…Sales Tax has a greater risk to compromise revenue collection particularly for 2019 compared to fixing the administrative and system problems of VAT,” he said. “The bill in its current shape requires significant panel-beating. Sales Tax is premised on many pillars but in order for it to be workable, you have to address three key issues in the bill and we have an opportunity that the bill is at the stage where we can provide input, where it is available for panel-beating. We have to address the effects of tax on tax, inflation that can be induced because of the cascading effect of sales tax. Number two is that the various paragraphs of exemptions, discretions will create distortion to the tax environment because tax by its nature should provide a level playing field, minimise distortion in the business environment.”

Mutati said introducing multiple exemptions creates distortions and would make compliance and revenue collection a challenge.

“It will create an appearance that if you are able to lobby effectively, you can secure an exemption or discretion,” he said. “Tax by principle is supposed to be anchored on equity and fairness and it is faceless and those principles must not be compromised. This is the injection that we need to put in the conversation on the sales tax and I think we need to give it a little bit more space to think through particularly with the challenges we got in 2019. There are probably more urgent issues that we must attend to that are directed towards enhancement of revenue and compliance in terms of revenue collection.”

Mutati said most businesses were having difficulties in paying taxes.

“And I think it is time again that we considered an amnesty in order to create and dismantle what is owed to ZRA and creating the revenue that will go into the economy to address difficulties that we have on one hand, and on another hand, to give businesses space to breathe again and move forward,” he said.

Mutati said the government needed to prioritise the dismantling of domestic arrears particularly in the agricultural sector.

“That is an issue of sufficient urgency given that we have a significant budget deficit that has been provided for in the 2019 budget,” he said. “What is required is money. We need to prioritise the dismantling of domestic arrears particularly in the agriculture sector to give farmers life again to survive. You can only grow the farmer if you attend to the challenge of payment and I am glad that the President [Edgar Lungu] has acknowledged that and has given directives to dismantle domestic arrears particularly in the agriculture sector. It is only when you inject money in the local economy when the wheels begin to turn and you again begin to collect taxes. So, something must be done to create action. So the start must be us starting with dealing with arrears.”

Mutati said the other thing was to realise that “yes, we have the issue of debt and salaries where when the two combine, they consume over 70 per cent of the domestic revenue given in a month leaving very limited money to address other development challenges.”

“And in addressing the issue of debt, let us also address the issue of domestic debts as it is associated with bonds and treasury bills,” said Mutati.

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