THE “FIRST FRIDAY” COPPERBELT PROVINCE CORPORATE MANAGERS’ FELLOWSHIP: 06TH FEBRUARY, 2009 addressed by Commissioner General

THE 2009 BUDGET AND THE ROLE OF THE ZAMBIA REVENUE AUTHORITY

The club president of Kitwe lions

All distinguished invited guests.

I wish to extend our profound happiness to come and join you at this important occasion. It is always an honour and privilege to be invited by organisations such as yours. More to so, that I am made to visit my home city, Kitwe.

I will provide a statement that hopefully will set the tone for discussion today. I will start by briefly giving you some background on the Zambia revenue authority and its mandate, our corporate structure and governance including our tax administration system. Later I will briefly talk about the performance of our revenue system. I will end my statement with a discussion on the strategies we have set for ourselves for the future.

In the second phase of our interaction my experts and i will discuss the measures that were announced in the 2009 budget. The purpose of the discussion on the 2009 budget is to provide more clarification on the tax measures regarding their administration and possible impact on the corporate organizations. In the last phase we shall engage in a question and answer session.

Lion president, prior to the establishment of ZRA, revenue administration was under the ministry of finance in two departments: department of income tax and department of customs and excise. However, the performance of these two departments was not satisfactory which resulted in the effectiveness of this country’s revenue administration system deteriorating. The country’s revenue collection declined from 30% of GDP in 1970 to 13% in of GDP in 1993. In response, the government decided to review tax policy and reform tax and customs administration to improve revenue collection. The Zambia revenue authority was therefore established as a corporate body in 1994, under the Zambia revenue authority act, chapter 321 of the laws of Zambia, enacted in 1993. The authority has a governing board that oversees its operations and membership of the board is prescribed in the ZRA act and represents all key stakeholders.

The key mandate of the authority is to assess, charge, levy and collect all revenue due to government and to ensure that all revenue collected is, as soon as reasonably practicable, credited to the treasury. In addition the authority enforces all relevant statutory provisions, provides statistical information to government on tax policy and facilitate trade. The taxes that are administered are; value added tax; surtax; customs duty; excise duty; income tax; property transfer tax; mineral royalty; medical levy; motor vehicle registration fees.

Since inception the ZRA has increased revenue collection for the country. Tax as percentage of GDP is now about 18%, an increase from 16.2% in 2006. Currently our tax collection contributes for 2009 is 66.7% of the national budget.

Structurally, since the formation of the Zambia Revenue Authority in 1994, there has been a shift from international trade taxes to Income Tax. Income tax contribution has increased from 31.5 % in 1995 to over 47 % in 2007. Meanwhile trade taxes have declined from 48% in 1996 to 25 % in 2007. Some of these shifts were as a result of the progressive reduction in tariffs due to trade liberalization. In the domestic economy, domestic vat has decreased from 38% in 1996 to 28% in 2007.

In 2008, we managed to collect k9, 682.7 billion. The major tax revenue contributors were PAYE (26%), Company Tax (14%), customs and excise duty (24.5%), and total VAT (22.8%). It is clear that income taxes (PAYE, Company Tax etc.) remain the largest contributors to tax revenue at 45%. It is hoped that this will be complemented by a good performing VAT.

The 2009 budget, proposes to raise total tax revenue of K10, 205.4 billion, excluding medical levy. The budget projects to raise 42.9 % in income taxes compared to the actual collection of 45% in 2008. Specifically, company tax will contribute 10.8 %; PAYE will remain at 26%. This lower projection is in recognition of the troubles companies are going through as a result of the global economic crisis. However, the budget projects an increased share of customs and excise duties at 27.5% from 24.5% in 2008, and total vat at 24.9%. The rise in VAT collection will mainly be on account of high import vat collection and the anticipated improved compliance. These projections imply that companies are going to contribute relatively less in terms of income tax.

We expect the crisis to negatively affect the profitability of companies resulting in low corporate tax collection. In addition, we expect low revenue collections through PAYE as result of possible job losses being faced especially in export based companies such as copper producing companies.

For the current and future the ZRA has embarked on several strategies. Some of these are the tax modernization reforms which will entail simplification of tax administration procedures, reducing costs of compliance on taxpayers, improving service delivery, improving compliance and introducing electronic taxation ( e-filing, payments (RTGS). Other initiates have supported the improvement and modernisation of customs administration. This includes increased use of information technology (mobilize scanners), accredited clients programmes, improving border infrastructure, and international cooperation in customs administration (one stop border post initiative), combating smuggling and increased trade facilitation.

It is my desire to create a predictable tax base on which we can base clear policies. I also look to having predictable and sustainable revenue for government. This is only possible if there are partnerships between and among players. We look to do business like people that are in the 21st century.

I thank you and god bless.