2014 starts on an interesting footing. So I thought I remind you of the tax measures expected to start today. Most of these where in the 2014 Budget speech.
Airtime
Excise duty on airtime has been increased by 5%. So it is now 15%. Expected result is the reduction of the minutes you spent per Kwacha! Assuming you took note of the minutes you used to spend, it will surely drop in the new year. Moreover, you bundles are also expected to be hit by that change! Less MBs per Kwacha.
The increase was justified as raising money for variious developmental programs that the government will be implementing. If it has anything to do with projects like roads and any other infrastructure development, I have no problem with my drop in "units"!
Clear Beer
Beer has had an excise duty of 60% for a long time. However, this was suspended by a statutory instrument to 40%. So beer has been working with 40% excise duty. As of 1st January, 2014, the effective duty of 60% will kick in and everyone will have to pay that 20% they have not been paying.
Clearly, beer has long been known not to be affected by changes in prices - not that much anyway. So we should expect the same quantity of consumption and drunken behavior but now at a higher price. The money is also intended to be pumped into developmental projects.
Tourism Packages Standard for VAT
Tourism packages that are sold from 1st January, 2014 will now be standard rated. The 16% VAT will apply and tourists will pay when they procure a package. I am a firm believer in standard rating of all goods and reduction to the barest minimal of the exemptions and zero-rating of goods and services for VAT purposes. I think this is a good measure and one which should be used to improve our VAT performance.
I wish many more goods and services would be moved to standard rate. Eliminate the zero-rating and exemptions to the barest minimal. VAT would be boosted.
However, I believe we need to also look at the VAT chain and see where the tax leakage is. This will ensure all VAT paid or should be paid, is paid and to the right institution for it to be used in the right way. This is important and critical for Zambia.
Property Transfer
Property transfer rate has moved from 5% to 10%. This means all those selling property like houses or mining right, will pay an extra 5%. So those who plan to sell property in 2014 have to take into account this change as you may find yourself paying a little extra for property transfer tax.
Withholding Tax on Rentals
Withholding tax on rentals has dropped from 15% to 10% and has been made a final tax. Because it is now a final tax, it would not be used for deductions in one's final tax liability.
It is expected that this would bring in a "net increase" in collections under this tax even though it has been reduced. This is because there will be no more deductions claimed against it. So those in lose making positions will have to deal with this tax separately as it is a "stand alone tax". (I hope my attempt at simplification has not introduced a different meaning :) )
Public Benefit Organisations (PBOs)
These are charitable organisations approved by the Minister of Finance for various rebates, refunds or remissions when they import or buy goods for charitable works.
As a result of general rationalizing of tax incentives, various items which were previously available for refunds or remissions, will no longer receive such treatment. In particular, no motor vehicles will be "exempt" from paying taxes when imported by the PBO. All motor vehicles imported by these organisations will need to be paid for in full.
It seems like a harse decision to take, but when you hear stories of some churches which imported Hummers, X5, etc for their "pastor" in "helping" the need in society, who would look at this measure as "harsh" seriously, there is need to make people pay the due taxes in full and the right amount.
Though this measure was legislated in November, most PBOs will feel the effect in 2014. Being a 2014 budget measure, it suits to be discussed here.
Access to Banking Information
Zambia Revenue Authority (ZRA) will have access to information, notwithstanding obligations and secrecy imposed under the Banking and Financial Services Act, the Evidence Bankers Book Act, Legal Practitioners Act and the Accountants Act, required for tax purposes.
Any person or organisation that had preveneted the ZRA from accessing information on "secrecy" or any such reason, will have an interesting find in 2014.
Grant Aided Institutions
Grant aided institutions that will now be required to deposit their revenues in the general revenues has been increased with the addition of Zambia Environmental Management Agency (ZEMA), Patents and Company Registration Agency (PACRA), Competition and Consumer Protection Commission (CCPC) and Weights and Measures Agency. This is in line with annoucements in 2013 Budget which say the first statutory bodies' (ERB and ZICTA) revenues being brought into the general pool.
I hope this will truly bring about prudent management of revenues by the institutions in questions and ensure that government will have enough resources to provide for public services efficiently.
These are a few issues that will be brought on board by the year 2014 on the tax and budget front. We hope to see positive outcomes at the end of the year that we can talk about.
Happy 2014
