Cabinet Approves New Sales Tax And Abolishes VAT

Cabinet yesterday approved the publication and introduction of the Sales Tax Bill and the Income Tax Amendment Bill of 2019, to parliament.

Chief Government Spokesperson Dora Siliya announced that the bills were approved during a Special Cabinet Meeting held at State House yesterday.

In a statement issued to ZANIS in Lusaka today, Ms. Siliya said the Sales Tax Bill of 2019 has a number of objectives, which include the introduction of a sales tax on the supply of goods by manufacturers, producers, distributors, wholesalers and retailers and the importers of goods into the country.

She explained that the bill also aims at imposing sales tax on the supply of services in the country, by service providers and importers of services, with an exemption of certain supplies, imports and exports of goods and services from tax.

“This bill has a number of objectives such as providing for the registration and de-registration of taxable suppliers; provide for the use of electronic devices, equipment or any other devices; provide for the collection of sales tax; repeal and replace the Value Added Tax Act, 1995; and provide for matters connected with, or incidental to, the foregoing,” she stressed.

Ms. Siliya who is also Minister of Information and Broadcasting Services pointed out that Cabinet is of the view that the proposed Sales Tax will put a stop to the escalation of VAT refunds, dating back to 2009, and estimated at a cost K17.9 billion as at January 9th, 2019.

She underscored that the VAT refunds have negatively affected the economy of the nation, adding that the Sales Tax is the best way forward for the country.

On the Income Tax Amendment Bill of 2019, Ms. Siliya said the object of the Bill is to revise the turnover tax threshold from eight hundred thousand Kwacha (K800, 000) per annum to five hundred thousand Kwacha (K500, 000) in order to harmonise it with the Sales Tax threshold.

She further emphasized that the enactment of the Sales Tax will have an effect on the Income Tax Act, Cap. 323 as the turnover tax threshold of the Income Tax Amendment Bill will be five hundred thousand kwacha or below, per annum.

Below is the full statement

(SPECIAL) CABINET MEETING HELD AT STATE HOUSE ON MONDAY, 1ST APRIL, 2019

His Excellency the President Mr. Edgar Chagwa Lungu called for the 8th (Special) Cabinet Meeting at State House held today, Monday 1st April, 2019, at which two (2) substantive legislative matters were discussed as follows:

Sales Tax Bill, 2019

Cabinet approved for publication and introduction in Parliament, of “The Sales Tax Bill, 2019”, whose objectives are to:

(a) introduce a sales tax on the supply of goods in the Republic on manufacturers, producers, distributors, wholesalers and retailers and the importers of goods into the Republic;
(b) impose sales tax on the supply of services in the Republic by service providers and importers of services into the Republic;
(c) exempt certain supplies, imports and exports of goods and services from tax;
(d) provide for the registration and de-registration of taxable suppliers;
(e) provide for the use of electronic devices, equipment or any other devices;
(f) provide for the collection of sales tax;
(g) repeal and replace the Value Added Tax Act, 1995; and
(h) provide for matters connected with, or incidental to, the foregoing.

Cabinet is of the view that the proposed Sales Tax is also aimed at stopping the escalation of VAT refunds, dating back 2009, estimated at K17.9 billion as at 9th January, 2019.

The VAT refunds have greatly negatively affected the economy and, therefore, the Sales Tax is the best way forward for the country.

Further, the introduction of the Sales Tax will enhance domestic revenue mobilisation by broadening the tax base and simplifying administration as well as compliance processes.

The Bill shall be introduced in Parliament tomorrow, Friday 2nd April, 2019 and after final approval by Parliament during the June sitting, the effective date as announced by the Minister of Finance is 1st July, 2019.

The Income Tax (Amendment) Bill, 2019

Cabinet in line with the approval of the Sales Tax, also approved a consequential Bill, The Income Tax (Amendment) Bill, 2019. The object of the Bill is to revise the turnover tax threshold from eight hundred thousand Kwacha (K800,000) per annum to five hundred thousand Kwacha (K500,000) in order to harmonise it with the Sales Tax threshold.

The enactment of the Sales Tax will have an effect onthe Income Tax Act, Cap. 323 as the turnover tax threshold of the Income Tax (Amendment) Bill will be five hundred thousand kwacha or below, per annum. Once a tax payer exceeds this threshold, they will become liable to pay Sales Tax in respect of taxable supplies.