‘REINSTATE FUEL VAT, EXCISE TAXES ON FUEL’
VALUE Added Tax ( VAT) and excise taxes on fuel should be reinstated as the evolution of pump prices of petroleum will depend on other relevant factors such as efficiency procurement process of the product.
Overtime, the evolution of pump prices of fuel will depend on other relevant factors, chief among them being the strength of the Kwacha and efficiency of the petroleum procurement process.
This is according to the Civil Society Organisation (CSO) Debt Alliance Coordinator, Wakumelo Maata at the 2023 national budget forum in Lusaka recently,
He said this in a presentation on “Analysis of the International Monetary Fund (IMF)-Extended Credit Facility (ECF) programme for Zambia: a CSO perspective.”
Mr Maata expressed confidence that reinstating VAT and excise taxes on fuel while adjusting fuel prices accordingly would lead to VAT collections increasing by 5.7 percent of Gross Domestic Product (GDP).
“With the mines paying taxes in USD to the government, the impact of a stronger Kwacha will be double edged. It will mean relatively lower revenues in Kwacha terms stemming from the mining sector.
“On the flipside, it will mean lower petroleum importation costs and potentially negate the impact of resumption of VAT and Excise taxes on fuel,” he said.
Mr Maata stressed the need for Government to consider prioritising the positive impact of a stronger Kwacha above and beyond its downside impact on the local currency equivalent inflows from the mining sector.
If need be, he stated, considerations to revert to mines paying their taxes in Kwacha should be made so that focus over the medium term was targeted at strengthening the Kwacha.
Meanwhile, Mr Mataa pointed out the need to prioritise dismantling the current stock of arrears
A sum of K30.5 billion has been earmarked over the period 2022-2024 by the Government.
Mr Maata explained that reducing the stock of arrears would stimulate economic activity.
“Dismantling of the current stock of arrears while placing a cap on the accumulation of new arrears will be pivotal to ensuring debt sustainability and fiscal consolidation over the medium term. Government should indeed prioritize this intervention,” he said.