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International Tax Dialogue

International Tax Dialogue. Presumptive Taxes and voluntary VAT administration Samuel Bwalya Director Research and planning Zambia Revenue Authority. Introduction. In Zambia the size of the informal sector is estimated to be between 40% and 60% of the official gross domestic product.

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International Tax Dialogue

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  1. International Tax Dialogue Presumptive Taxes and voluntary VAT administration Samuel Bwalya Director Research and planning Zambia Revenue Authority

  2. Introduction • In Zambia the size of the informal sector is estimated to be between 40% and 60% of the official gross domestic product. • The informal sector currently contributes less than 3% towards direct tax revenue collection

  3. Arguments for capturing SMEs • Equity • Fairness • Sustainable state building • Efficiency • Broadening the tax base • Increase government revenue • Administration should be made cost effective by promoting quasi-voluntary compliance

  4. Presumptive tax regime • Introduced in 2003 • Motor vehicles-min-buses and taxis • Bases capacity • Turnover tax • Base taxes (traders in markets) • I will focus on presumptive taxes for transporters and turnover taxes • Then relate this to Voluntary VAT administration

  5. Presumptive tax regimes • Based on capacity • Administered through agents • Local councils • Bus drivers association • Other private sector association • administration • Agents are appointed through competitive tender • Presumptive tax tickets are printed by ZRA and administered by agents as daily fees at bus stations and taxi ranks • Enforcement also done through road traffic agency • Tax clearance certificates for licensing operators • Tax clearance issued by ZRA

  6. Presumptive Taxes • Impacts • Creates culture of paying taxes • Increase revenue collection • Average revenue but less than 1% of domestic tax revenue • Turnover tax • Administered by ZRA through local offices • Simplified booklet for payments • Non-need for accounting records • 3% of turnover, threshold less than US$50,000 annual turnover • Average revenue per year 1.3% of total domestic taxes revenue between 2003 and 2007 • 2008, increased to 3-4% due to introduction of advance income tax

  7. Turnover tax • Introduced advance income tax • Not a final tax • 3% initially • Then increased to 6% to make it optimal • Collected on imports of unregistered and non-compliant taxpayers • Revenue collection increased substantially • Registration increased • Refunded when one files a return in-land

  8. Voluntary VAT registration • Voluntary VAT • Introduced in 2007 • For those with annual turnover below US$50,000 • Qualification criteria • Alignment issues • CIT/VAT/PAYE • Requirements for formal transaction • Vat certificates • Tax clearance certificates • Administration budern

  9. Challenges and opportunities • Challenges • Opportunities • Concluding remarks

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