Zambia stops replacement of VAT with sales tax
- Sep 28, 2019 | Richard Asquith
Zambia has dropped plans to replace its Value Added Tax regime with a sales tax. This was largely due to opposition from businesses sectors, fearful of the compound nature of the sales tax and inability to recover sale tax incurred. Businesses are able to reclaim VAT the suffer from local sales. In particular, the extraction industryhave been highly vocal in its objections.
The finance minister, Bwalya Ng’andu, said in a budget speech this week “Government has decided to maintain the Value Added Tax, but address the compliance and administrative challenges”.
Zambia had postponed the replacement of its existing VAT regime with a sales tax three times, and the latest deadline was 1 January 2020. The original plan had been for 1 April 2019.
VAT was to have been withdrawn due to the difficulties of funding refunds. VAT was first introduced in 1995. The sales tax would have applied on the supply of goods by manufacturers, producers, distributors, wholesalers, retailers and the importers of goods into the country.