Zambia: Will ZRA's Tech Move Seal Tax Leaks?

World over taxing the population by governments is tasking especially with the current global technological sophistication.

No-one wants to pay 'Caesar what belongs to Caesar,' hence taxpayers engage in all sorts of tax avoidance gymnastics to a larger extent of engaging in illegal acts of tax evasion.

Another gimmick identified by tax experts is window dressing financial statements so that they underpay the treasury and part away with more profits.

With Value Added Tax (VAT) being a refundable tax in Zambia, corporates and individuals tend to window dress or come up with fictitious figures or financial statements so as to claim more VAT refunds not in tandem with the actual inputs.

To minimise this, there is need for a robust tax administration system that seals loopholes in tax collection.

In my view ,despite stakeholders having reservations on the capacity of the Zambia Revenue Authority (ZRA) to handle sectors like the mining sector which seems sophisticated to tax because of complex production nature, reforms being taken to close tax collection leaks are commendable.

One of the game changing initiatives is the introduction of a smart invoicing system among other measures that would close most gaps in the tax administration.

According to ZRA acting director-data analytics Yvonne Mwanza, smart invoicing is a software application that is installed on a windows-based desktop computer, laptop or tablet that enables users to create, customize, and manage transactions locally on their own devices.

ZRA is confident, the introduction of online invoicing will in no doubt enhance compliance in the tax administration as it will help sealing loopholes in the tax administration.

This online invoicing, ZRA calling smart invoicing is among those that will make tax validation possible.

With smart invoicing, ZRA is looking at using it to validate VAT input claims thereby increasing revenue measures for the Government.

From the K125 billion tasked by the Government to collect in the 2024 fiscal year,K36 billion will come from VAT, hence this introduction will allow for ZRA to maximise revenue collection.

The tax collector is also plotting to deploy smart invoicing to increase compliance regarding rental tax which was proving cumbersome to implement.

The smart invoicing whose pilot started late last year will be rolled out on July 1, 2024.

Currently, the authority is carrying out roadshows to introduce this technology based tax collection.

ZRA has in addition started implementing mandatory pre-clearance of commercial goods effective May1, 2024 all in an effort to maximise and simplify tax collection.

The measure, according to the taxman, is meant to enhance efficiency and improve the turnaround time in clearance and movement of goods at all borders.

I am told communication has already been made to clearing agents, transporters, importers, exporters and the general public to the effect that no truck will be allowed into the customs area without documentary evidence showing that the goods have been pre-cleared.

The call by ZRA for stakeholders to comply with the requirement is good for the nation after all ZRA wants to lessen the time cargo was kept at the border to provide swift clearance of cargo.

. Nzala

Under the pre-clearance facility, clearing agents or importers lodge the necessary importation documents with ZRA prior to the arrival of the goods into the country as per recent statement by ZRA corporate communications manager Oliver Nzala.

When the goods arrive at the border there would be less time taken to process the clearance, which usually was the case when all processes are being timed at once.

In this case, what will be done is the mere verification of the goods, and this reduces the time goods spend at one point before getting to the final destination.

Mr Nzala went on saying: "This measure entails that bills of entry for all imports and exports should be registered and processed on the ASYCUDA World system, at least five days before the goods arrive at the intended port of entry or exit."

In this case any consignment that arrives at the border without a customs declaration will be subjected to a penalty of 1667 fee units translated into K500.

In addition, any false declarations or provisions of false information related to these imports and exportations would lead to punitive measures, including possible seizure of the goods.

Such measures as well as those aimed at streamlining the administration of the Withholding VAT mechanism like the implementation of a strategic decision to abolish the withholding of VAT amongst large and specialised taxpayers in 2023 is welcome.

It is also worth noting that ZRA has intensified taxpayer engagements and education for tax payers to appreciate the importance of paying tax which is critical.

Previously, ZRA was perceived to be an institution that 'punishes' offenders without first creating an understanding but the recent openness and engagement is a recipe for enhanced tax collection.

ZRA should be encouraged to continue reforming its systems to conform to the changing global and regional developments in the tax system for it to be more relevant as the Government looks to maximising local resources mobilisation.

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