ZAMBIA REVENUE AUTHORITY, VAT RULE NUMBER 18(1(b))SHOULD BE AMENDED AND ZRA HAS AN OBLIGATION TO PAY THE OUTSTANDING VAT REFUNDS
WE HAVE BEEN SURPRISED BY SOME MEDIA REPORTS THAT APPEAR TO INDICATE THAT THE CHAMBER OF MINES (CMZ) HAS REACHED AN AGREEMENT WITH THE ZRA TO RESOLVE A CONTENTIOUS ISSUE RELATING TO THE NON-PAYMENT OF INPUT VAT TO EXPORTERS BY THE ZRA.
IN THE REPORT ASPERSIONS HAVE BEEN CAST THAT THE CHAMBER OF MINES PROPOSED TO MAINTAIN RULE 18 IN ITS CURRENT FORM AS IT IS MEANT TO STRENGTHEN THE VAT SYSTEM.
IT IS INCORRECT TO CHARACTERIZE THE ISSUE OF VAT REFUNDS AS AN ISSUE FOR THE MINES ALONE. ZRA HAS BEEN WITHHOLDING REFUNDS FOR ALL EXPORTERS, AS EVIDENCED BY A LETTER FROM THE ZAMBIA CHAMBER OF COMMERCE AND INDUSTRY (ZACCI) TO THE MINISTER OF FINANCE. THIS ISSUE THEREFORE CONCERNS THE ENTIRE ECONOMY.
THE CHAMBER RECOGNIZES THAT A NUMBER OF OTHER IMPORTANT SECTORS SUCH AS AGRICULTURE AND MANUFACTURING HAVE BEEN ADVERSELY AFFECTED BY THE CURRENT REQUIREMENTS BY ZRA UNDER RULE 18(1)(B).THE CHAMBER THEREFORE REGRETS THE CYNICAL AND GROSS MISREPRESENTATION BEING PERPETUATED THAT THE ISSUE OF VAT REFUNDS ONLY APPLIES TO THE MINING INDUSTRY.
WE WISH TO STATE THE FOLLOWING;
- THE FINANCE COMMITTEE OF THE CHAMBER OF MINES COMPRISING THE CHIEF FINANCIAL OFFICERS (CFOS) HELD A MEETING WITH THE ZAMBIA REVENUE AUTHORITY. PRESENT WAS THE COMMISSIONER GENERAL, DIRECTOR INVESTIGATIONS, DIRECTOR LARGE TAX PAYERS OFFICE, DEPUTY COMMISSIONER – CUSTOMS SERVICES, AND ACTING LEGAL COUNCIL AT REVENUE HOUSE
- THE PURPOSE WAS TO DISCUSS THE OUTSTANDING VAT REFUNDS AS PROVIDED IN THE LAW. THE BACKLOG HAS ACCUMULATED TO OVER US$600MILLION TO-DATE
- THE MEETING WAS ALSO CALLED TO DISCUSS THE PROVISIONS OF THE VALUE ADDED TAX RULES OF 1997, RULE NO 18(1).
RULE 18 HAS BEEN IN EFFECT SINCE 1997. BUT THIS RULE HAS NEVER BEEN FULLY ENFORCED DUE TO THE IMPRACTICALITIES OF DOING SO. HOWEVER IN 2013, THE ZRA BEGAN TO ENFORCE THIS RULE CREATING DIFFICULTIES FOR EXPORTERS TO RECLAIM THEIR INPUT VAT.
THE CHAMBER HAD PROPOSED TO THE ZAMBIA REVENUE AUTHORITY THAT THE REQUIREMENT THAT EXPORTERS OF GOODS AND SERVICES SHOULD SUBMIT DOCUMENTS FROM IMPORTING COUNTRIES BE AMENDED AS WE HOLD IT THAT ZRA SHIPPING INSPECTION AND DOCUMENTS ARE SUFFICIENT PROOF TO DEMONSTRATE THAT AN EXPORT OF GOODS AND SERVICES HAS TAKEN PLACE.
IN PARTICULAR, WE ARE CONCERNED THAT DOCUMENTS GENERATED BY THE ZAMBIA REVENUE AUTHORITY ARE DEEMED AS INSUFFICIENT OR INADEQUATE TO DEMONSTRATE PROOF OF EXPORT.
ALTHOUGH ZRA EXPRESSED CONCERN THAT SOME MEMBERS OF THE CHAMBER HAVE TAKEN ZRA TO COURT AND COULD NOT THEREFORE DEAL WITH THE TAX REFUNDS SO FAR OWED, THE CHAMBER HELD THAT THE MATTERS ARE SEPARATE AND SHOULD BE DEALT WITH ACCORDINGLY. THE CASES IN COURT RELATE TO RULE 18 WHICH WOULD AUTOMATICALLY BE RESOLVED ONCE THE NECESSARY AMENDMENT TO THE RULE IS ENACTED.
IT IS IMPORTANT TO NOTE THAT WE HAVE BEEN MAKING THESE SUBMISSIONS TO ALL RELEVANT AUTHORITIES.
ZERO RATING OF EXPORTS IS NOT A TAX INCENTIVE AND IS APPLICABLE ACROSS MANY COUNTRIES. IT IS DESIGNED TO PROMOTE THE GROWTH OF EXPORT EARNINGS THROUGH COMPETITIVEPRICING IN THE INTERNATIONAL MARKET.
WE WISH TO STATE THAT ZRA WITHHOLDING TAX REFUNDS WHICH EXPORTERS ARE LEGALLY ENTITLED TO, WILL RENDER THEIR PRODUCTS UNCOMPETITIVE.
ON 23RD OCTOBER 2013, WE SUBMITTED TO THE PARLIAMENTARY EXPANDED COMMITTEE ON ESTIMATES, AMONG OTHER THINGS THAT RULE 18(1) (B), BE AMENDED. THE REQUIREMENT THAT THE EXPORTER PRODUCES DOCUMENTS FROM THE IMPORTING COUNTRY WAS DIFFICULT TO IMPLEMENT AND COMPLY TO.
ON 4TH FEBRUARY 2014, WE MADE ANOTHER SUBMISSION ON THE EFFECTS OF WITHHOLDING THE REFUND OF VALUE ADDED TAX BY ZAMBIA REVENUE AUTHORITY ON METAL EXPORTS BY MINING COMPANIES TO THE THEN ACTING SECRETARY TO THE TREASURY, MR FELIX NKULUKUSA AT THE MINISTRY OF FINANCE WERE WE INDICATED THE IMPLICATIONS AS FOLLOWS:
- NON-REFUND OF VAT FOR THE PERIOD AUGUST 2013 TO DATE, TO THE TUNE OF MORE THAN US$600 MILLION HAS IMPACTED BOTH ON THE MINING COMPANIES AND THE ANCILLARY INDUSTRIES.
- SEVERE LIQUIDITY CRISIS FACED BY THE COMPANIES HAS RESULTED EITHER IN INCOMPLETE INABILITY OR DELAYED PAYMENTS TO SUPPLIERS AND CONTRACTORS.
- SOME OPERATIONS ARE HAVING DIFFICULTIES IN FUNDING EMPLOYEES’ SALARIES
- SLOW DOWN OR COMPLETE STOPPAGE OF CAPITAL EXPENDITURE AND IMPROVEMENT PROJECTS
- LOCAL SUPPLIERS UNABLE TO PROCURE THEIR IMPORTS
IT IS A WELL-KNOWN FACT THAT COPPER EXPORTS FOLLOW A THOROUGH DOCUMENTED PROCEDURE WHICH IS VERIFIED AT THE ZAMBIAN PORT OF EXIT, THROUGH THE ZRA’S ASYCUDA SYSTEM. WE HOLD THAT THE DOCUMENTS PRODUCED BY THE ZRA TO THE EXPORTER ARE SUFFICIENT AND VALID.
WE ALSO ARGUED THAT THE REGULATORY BURDEN ZRA WAS GIVING ITSELF WOULD IMPEDE THE SMOOTH FACILITATION OF TRADE AND EFFICIENT HANDLING OF TRANSACTIONS.
IN ADDITION, WE HAVE, LIKE EVERY OTHER SECTOR, ON 31ST JULY 2014, MADE PROPOSALS FOR AN AMENDMENT TO RULE 18(1) (b), AS PART OF OUR SUBMISSION ON THE MINING SECTOR NATIONAL BUDGET PROPOSALS FOR 2015 AND ALSO THE 2015-2017 MEDIUM EXPENDITURE FRAMEWORK.
ENDS
