ZAM Calls for Accelerated VAT Refunds and Comprehensive Tax Reforms to Boost Manufacturing Sector

The Zambia Association of Manufacturers (ZAM) has issued a robust appeal to the government, urging for swift action on Value Added Tax (VAT) refunds and the implementation of sweeping tax reforms aimed at invigorating the manufacturing sector.

This call was made during the 2024 pre-budget meeting held at the Intercontinental Hotel in Lusaka, where key stakeholders gathered to discuss fiscal policies and economic strategies.

Ashu Sagar, the President of ZAM, highlighted the critical need for a scorecard system that would prioritize VAT refunds and other tax reimbursements for manufacturers who consistently adhere to tax regulations.

“A structured and transparent system would not only streamline the refund process but also encourage compliance among manufacturers,” said Sagar.

In a comprehensive proposal, Mr. Sagar recommended reducing Income Tax rates for manufacturers from the current 20% for domestic markets and 10% for export markets to a unified rate between 16% and 14%.

This, he argued, would alleviate the financial burden on manufacturers, promoting the production and export of value-added goods and services, and preventing the accumulation of refund claims.

Additionally, Mr. Sagar suggested extending the timeframe for presenting proof of exportation under VAT Rule 18 from three months to six months.

This extension would provide manufacturers with a more practical window to comply with export documentation requirements.

Further tax reforms proposed by ZAM include raising the Turnover Tax (TOT) threshold from K800,000 to a level that better aligns with the classification of Micro, Small, and Medium Enterprises (MSMEs).

This adjustment is expected to provide relief to smaller manufacturers, enabling them to grow and contribute more significantly to the economy.

Mr. Sagar also called for the consolidation of council levies under a single overseeing ministry, arguing that this would simplify the regulatory environment and reduce the administrative burden on manufacturers.

He emphasized the need for regulations governing product listings in chain stores, which would enhance market access for locally manufactured goods.

“We also call for increased funding for the Department of Veterinary Services to bolster their capacity in combating livestock diseases,” added Mr. Sagar, underscoring the interconnectedness of various sectors within the manufacturing ecosystem.

In a forward-looking statement, Mr. Sagar advocated for the recognition of recycling as a priority sector, which would support sustainable practices and innovation within the manufacturing industry.

Reflecting on the current state of the manufacturing sector, Mr. Sagar noted its insufficient contribution to rapid economic growth, pointing out that the sector’s value-added growth has mirrored the broader economy’s sluggish trends over the past decade.

He stressed the importance of strengthening existing incentive frameworks and optimizing tax structures to enhance the sector’s performance.

“These measures will provide the necessary support for the manufacturing sector to flourish,” concluded Mr. Sagar.

The statements and recommendations were encapsulated in a formal statement issued by ZAM Chief Executive Officer, Muntanga Lindunda, signaling a strategic push towards revitalizing Zambia’s manufacturing landscape through thoughtful and impactful fiscal policies.