ZRA, local councils partnering is a plus

THE partnership between the Zambia Revenue Authority and Ministry of Local Government may appear to place a burden on the shoulders of those earning a living from small scale trade but it is actually a step in the right direction for the development of the informal sector
Recently, an agreement to expand the revenue base by taxing the informal sector has been signed by the Zambia Revenue Authority (ZRA), Ministry of Finance and the Ministry of Local Government.
The Memorandum of Understanding (MoU) will enable the ministry of Local Government to collect base tax and withholding tax on rent on a commission basis of 10 percent.

Currently, there are about 15,000 marketeers registered for base tax on the revenue system and about 13,000 tenants registered for withholding rental income tax.
A report by the International Growth Centre (IGC)) claims that the informal sector in Zambia employs 90% of the labour force, and has grown rapidly in recent years (approximately more than a million informal businesses). Most of these are rural, agricultural operations, run by farmers with low skills and generating low revenues.
The IGC state that characteristics of the informal sector in Zambia may be classified according to location of business, that is, whether located in the rural or urban area. Businesses in the urban areas of Lusaka and Copperbelt provinces form the top tier of informal sector firms. Compared to an average, typically rural informal enterprise, informal businesses in the city centres resemble a typical formal Micro, Small and Medium scale Enterprise (MSME): they have more educated owners, greater access to public services and earn significantly higher revenues. In addition, the majority of urban informal sector firms are shielded from tax inspector visits, unlike registered operators.
Revenues of many firms in this urban segment overlap with those of firms in the formal sector. In this regard taxation potential is highest for urban, informal sector firms. Furthermore, these firms often have access to infrastructure services (mainly electricity and water) and enjoy the benefits of formalisation, while circumventing registration costs, bureaucratic burden of tax compliance, and higher labour costs. On the other hand firms in the rural areas, notably those in agriculture and service sector are unregistered because of low skills and productivity. These firms would benefit from interventions designed to augment productivity, including skills training, availability of infrastructure and microenterprise lending facilities. However, many of these firms are survivalist in nature, and could “disappear”, with policies geared towards structural transformation in agriculture, and growth of the formal large-firm private sector, which can shift informal workers and small-business employers as employees in its formal sector.
Revenue collection from the informal sector has remained a challenge due to limited human resource, says ZRA Commissioner General, Kingsley Chanda.
Mr Chanda expressed confidence that ZRA would be able to tax all the Zambians through the signing of the MoU.
He said this yesterday in Lusaka during the signing of the MoU.
“One of the major concerns from the informal sector concerning the see of tax compliance has been the simplification of tax systems and processes.
“I have no doubt that this partnership will go a long way in shaping our tax policy for the future and enhance tax revenue collection from the two tax types,” Mr Chanda said.
Indeed Government desperately needs every single coin from tax payers to support its operations.
The fact that ZRA can partner with the Local Government means that the reach can be expanded across all the municipalities in the country. Not as a form of punishment but to also assist business entities to begin to take their businesses seriously.
Hopefully this can help in the push from informal to formal.
Acting Accountant General, Emmy Shawa-Chenguluka, expressed confidence that the MoU was of mutual benefits.
Ms Shawa-Chenguluka said the treasury remained supportive of such partners6which enhanced revenue collection.
“This MoU will enhance revenue collection for both ZRA and the Ministry of Local Government,” she said.
During the signing of the MOU, Ministry of Local Government Permanent Secretary, Ed Chomba, emphasised that he would not tolerate abuse of revenue which would be realised from the partnership.
Dr Chomba he would not take kindly the abuse of revenue by the local authorities.
“No council will abuse the funds collected. No money has to go missing. I expect to collect 100 percent through this partnership at the local level.
“The councils will have to exercise strict accountability of the resources. There is no need dor audit queries if there is accountability of funds,” he stressed.
The commission, he said, from the partnership would be used to improve service delivery by his Ministry.
Dr Chomba also said the partnership signified the new dawn to revamp decentralisation.
We look forward to the implementation of this service, not only for the possible contribution to Government coffers but also for the enhancement of individual businesses.