Editor's Comment

Spread tax burden

FOR decades, the heaviest burden of tax has been on the shoulders of those in the formal sector.
It shouldn’t be that way.
It is also generally agreed that to lift some of this weight, the tax collectors should spread net wider.
This is the context the hitherto Acting President Inonge Wina said on Thursday that while it is an obligation for Zambians to pay taxes, they should not be burdened.
“My government wants to see to it that while Zambians should pay taxes, the tax burden should not stifle their livelihoods. I am hopeful that the Minister of Finance will consider this important point when she presents the 2019 national budget,” Mrs Wina said.
She is on point. Her sentiment is valid and should be taken into consideration by the tax experts.
It is undebatable that taxes are a necessity for every country. They provide a source of revenue for Government to deliver various services and benefits to its citizenry.
For instance, for Government to provide education, health services, sanitation and water services, social amenities and infrastructure among many others, there is need for money.
There is no government that can effectively provide public goods and services and finance other obligations in the absence of an efficient domestic resource mobilisation.
Tax is a legal means by which Government raises revenue, levied on the income or property of persons or organisations, on the production costs or sales or prices of goods and services.
The legality and necessity of taxation are unquestionable.
Even Biblically, the Lord Jesus Christ acknowledged the need to pay taxes to governing authorities. When He was asked by some Pharisees on whether it was lawful to pay taxes to Caesar or not, He ably answered, “So give back to Caesar what is Caesar’s, and to God what is God’s.”
While taxation is inevitable, it should be administered in such a way that it does not hurt the very people it is intended to serve.
This is the Vice-President’s contention, which is obviously anchored on the governing Patriotic Front manifesto, which seeks to put more money in people’s pockets.
We know that over the past years the tax system in Zambia has undergone different reforms to improve effectiveness and efficiency.
While this is the case, the formal employment sector has continued to be an easy target for revenue collection.
Currently, the personal income tax rate stands at 37.50 percent while the pay as you earn exempt threshold is K3,300.
Some stakeholders have contended that the tax burden on the formal employment sector, which only accounts for between 700,000 to 800,000 people, is huge.
Pay as you earn is not the only tax administered by ZRA. There are many others such as value-added tax, income tax, withholding tax, excise duty, property transfer, mineral royalty and presumptive tax among others.
As rightly observed by the Vice- President, it is important that the tax burden is fairly distributed and there should be no sacred cows.
It is everyone’s duty to pay tax.
Given that the country has a large informal sector, ZRA should devise effective and efficient ways of capturing revenue from this sector.
It is not a secret that ZRA has struggled to fully harness the revenue potential that lies in the informal sector.
If the burden on a few in the formal sector is to be lessened, ZRA needs to broaden the tax base and devise more strategies of increasing compliance.
There is also need to create more formal jobs if the tax burden is to be lightened.
The agenda Government has embarked on to bring about industrialisation is a step in the right direction if we are to create more formal and taxable jobs.
Banks and other financial institutions should also provide affordable finance to promote the growth of small businesses which have potential to create decent jobs.
While ZRA is understandably under pressure to meet its targets to support government operations and service delivery, there is need to also bear in mind the impact on the tax-payers.
Taxes are not a form of punishment but an obligation which should not stifle people’s livelihoods.
While people need to pay taxes, they also need to provide for their families and improve their standards of living.
But if the tax burden weighs individuals down, it will be difficult for them to improve their living standards and subsequently contribute to the development of the country.

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