Africa’s second largest copper hotspot will not implement its proposed sales tax on the 01 July as planned due to the need for time as the bill passed through different stages of parliament. This was established in an interview provided by the Finance Minister Margaret Mwanakatwe in Lusaka. The Minister said the 01 July deadline will be affected by parliament opening on the 18 June and that the bill will have to pass through various stages before enactment into tangible law. This will be the second deferral after the MinFin and the tax authorities couldn’t make 01 April deadline.
Zambia proposes moving to a sales tax from a value added tax regime in a bid to widen its revenue base and ease pressure on the sovereign through eradication of tax refunds with the new tax regime. Mwanakatwe said Zambia will forgo K7.1 billion due to non adherence of the the implementation deadline.
BUSINESS CONFIDENCE AND THE NEED FOR POLICY CONSISTENCY
Zambias business pulse as measured by the purchasing managers index (PMI) has in the first half of 2019 grapple with lack of money in the economy, record input cost inflation from high fuel prices and above all uncertainty that has kept pricing decisions on the fence.
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The copper producer is already at a 2.5 year low in business confidence. All months save February printed headlines of below 50 with May being the worst that saw the copper producer deepen in contraction zone at 43.9 from 45.2. (Readings of above 50 signal growth resumption while those below are a constriction in manufacturing pulse). Business planning has been the toughest in the H1:19 as there has been no clear cut direction as to the new tax regime with a glimmer of guidance provided in the week to 01 April when the proposed tax rates were provided. Even then, these were criticized during stakeholder consultation sessions as being high and potentially inflationary.
The proposed fix to containing inflation is to manage the value chain – with on average 4 stages – which is harder to address than lowering the tax rate. Many have argues that the longer the value chain the higher the price escalation risks. The tax authorities have not provided the expected business foresight in creating an enabling environment to help the private sector plan. Analysts feel the authorities should manage policy inconsistency better as these shifts reflect lack of coordination and strategic foresight in managing business expectations which could have negative impacts of the growth trajectory of the nation. This could them threaten Zambian rankings on the ease of doing business index. Let alone the IMF revised Zambia’s growth forecast for 2019 to 2.3% which is lower than the projected Sub Saharan Africa average of 3.4%.
Other threats to business pulse include increased costs from power supplements in light of the systemic energy deficit for 2019 and currency depreciation weighing input costs. Drought effects are currently the biggest risks to growth.
Compiled by Oscar Meander