Zambian Economic Analyst Warns Current Tax Implementation Models May Defranchise SMEs
Renowned Zambian economic analyst Kelvin Chisanga has raised concern over the current tax implementation methods in Zambia, warning that they risk sidelining small and medium enterprises (SMEs) from fully participating in the local economy.
Mr. Chisanga specifically cited the Smart Invoice system, which he described as a potentially effective tax compliance tool. However, he emphasized that the lack of a strategic rollout, including supportive mechanisms for SMEs, has made compliance difficult for many businesses.
“Smart Invoice is a good model for tax monitoring and compliance,” Chisanga said. “But the way it’s being implemented is putting businesses—especially small ones—under immense pressure. It needed a grace model to help build compliance confidence while cushioning the poor.”
He further noted that Zambia’s tax base remains narrow, with only a small number of taxpayers actively contributing to national revenue. This, he said, places an unfair burden on compliant businesses, especially as many informal sector players remain outside the formal system.
According to Chisanga, the informal sector, which should benefit from simplified compliance tools, is instead struggling due to a lack of tax literacy and clarity around the new systems. He warned this could lead to reduced local production and growth, especially for businesses already battling tax-related legacy issues and complex regulatory hurdles.
“The Smart Invoice system works in real-time, instantly capturing transactions against a tax identification number,” he explained. “While this is a positive step, many small businesses are overwhelmed by the technicalities, and that discourages meaningful participation in the economy.”
Mr. Chisanga also cautioned that industries such as oil and gas, where frequent credit notes and VAT claims are common, may encounter operational challenges under the new digital system, as they seek exemptions or adjustments to align with their sectoral needs.
He criticized the Zambia Revenue Authority (ZRA) for failing to adequately educate businesses on the country’s tax framework. This, he argued, has led to a rise in non-compliance, confusion in tax returns, and illicit trading activities across borders.
“Many entrepreneurs are enrolled on inappropriate tax plans such as income tax, which is complex and costly for their business size,” Chisanga added. “Without adequate education and support, these tax policies could alienate ordinary Zambians from entrepreneurial opportunities, worsening poverty and the cost of living.”
Mr. Chisanga urged the Ministry of Finance and ZRA to reconsider their implementation strategies, including introducing targeted educational campaigns and flexible compliance models to ensure that tax systems support rather than stifle economic growth.
