22 August 2014

Zambia: Analysts Back Rule 18 On VAT Measures

LOCAL analysts have supported measures contained in the Value Added Tax (VAT) General Administration Rule number 18, which has generated considerable debate in various quarters.

This is seen as a prerogative of the State to effect measures that on one hand ensure the pre-emptying of tax evasion and all forms of fraudulent economic presentations.

Local analyst David Punabantu said in Lusaka that the Bank of Zambia allowed exporters and mining companies to sell their commodities in United State Dollars as a 100 per cent direct retention.

Mr Punabantu said this was outside the jurisdiction of the Ministry of Finance or the Zambia Revenue Authority (ZRA) to counter-check these VAT claims.

This rule is ostensibly aimed at the mining sector which largely sources internally generated revenue in form of tax, and the sector boasts of the largest labour force besides the Government.

In line with this understanding, the Government has the mandate to effect measures that would entail efficient administration of revenue.

Mr Punabantu said the VAT refund was genuine but as far as the paperwork goes, ZRA appeared to have questions on the real value.

This may see the claims to be over-exaggerated considering that the mines have issues concerning their claimed production of not only copper but other minerals like gold and silver.

In a separate interview, Private Sector Development Association (PSDA) chairperson Yusuf Dodia advised the Government to consider the re-introduction of Statutory Instrument (SI) number 55 to compel mining companies to bring back money into Zambian banks.

He said the challenge faced by the Government was that there was no law in Zambia compelling mining companies to bring back money from foreign transaction into Zambian banks, meaning that VAT general administration was conflicting with the revocation of SI number 55.

He said the Government was now saying that, in order to pay back the refunds, there was need to fulfill VAT demands on exports made and prove that payments came back into the country, that's when the Government would give refunds.

Mr Dodia also said the Government wanted to pay VAT refunds using money from the $1billion Eurobond.

He said $300,000 had been used, leaving a balance of $700,000 at the Central Bank.

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