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TitleThe Sales Tax Proposal: Are we Beating a Dead Horse?
AuthorNalishebo, Shebo; Banda-Muleya, Florence
Date of Publication201909
PublisherZambia Institute for Policy Analysis and Research (ZIPAR)
Number of Pages20 pages
Geographical CoverageZambia
KeywordsSales tax, Value-added Tax, VAT, Hybrid Sales Tax, Tax Refund
AbstractIt is an undeniable fact that the VAT system, like all other tax regimes in Zambia, has been dogged by low yields as evidenced by low VAT C-efficiency rate. The low yields have been due to, among other things, numerous exemptions, weak tax administration, and high and unsustainable refunds. The proposed Sales Tax deals with the VAT refund issue. But removing refunds does not necessarily fix the low yield problem considering that the low yields are a result of weak tax administration and poor compliance. Moreover, the proposed design of the Sales Tax will lead to several adverse economic effects, with the main issue being the cascading effect. This is bound to lead to higher effective tax rates across all sectors of the economy, but more so in business services, mining and manufacturing. To mitigate the cascading effect, producers, being rational economic players, will most likely change their behaviour by, among other things, consolidating the supply value chain to the extent possible, thereby cutting out smaller firms. The cascading effect will also increase the cost of production, which, turn is also likely to lead firms to cut back jobs to the estimated tune of 47,000 direct jobs and potentially 56,000 additional job cuts in smaller firms.
Copyright HolderZambia Institute for Policy Analysis and Research (ZIPAR)
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Filesize263715 MB
File FormatPDF
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