Group urges Zambia Revenue Authority to fully scrap Witholding Value Added Tax, cites inefficiencies

The Civil Society for Poverty Reduction (CSPR) has urged the Zambia Revenue Authority (ZRA) to fully decommission the Withholding Value Added Tax (WVAT) mechanism, rather than merely suspending it, arguing that the system failed to meet its intended goals.

ZRA recently announced that the WVAT system would be officially suspended effective August 1, 2025, following the successful rollout of the Smart Invoicing System.

In a statement issued in Lusaka on Monday, CSPR Executive Director. Isabel Mukelabai, said that although the WVAT mechanism was introduced with the aim of capturing non-compliant VAT payers, it fell short of delivering tangible results.

“Despite its noble intent, the WVAT mechanism did not achieve its intended objectives,” Mukelabai said.

She commended ZRA for embracing digital solutions to modernize tax administration, which she noted had enhanced transparency, efficiency, and effectiveness in VAT compliance and revenue collection.

However, Mukelabai pointed out that WVAT was plagued by administrative inefficiencies—including delayed VAT remittances by appointed agents and challenges in tracking financial transactions, especially within the informal and semi-formal sectors.

“Traders were inconvenienced, and in some cases penalized, when appointed agents failed to remit VAT on time. In extreme cases, traders had to follow up or even file on behalf of the agents, incurring additional costs,” she explained.

Mukelabai also flagged the physical interface between traders and collecting agents as a weak link, arguing it created opportunities for compromise and corruption.

She stressed that the shift to the Smart Invoicing System was a welcome development but warned that its success depended on strengthening both taxpayer understanding and system usability.

“Traders still circumvent the system by avoiding issuance of smart invoices unless a buyer demands one,” Mukelabai noted, adding that not all goods are monitored by ZRA at the point of uplift, whether from imports or domestic production.

Citing research from countries such as Rwanda, Mukelabai highlighted that smaller taxpayers often faced significant challenges in adopting electronic billing systems—ranging from high costs to internet connectivity issues and difficulties correcting errors.

She further emphasized the need for investments in integrated data-sharing platforms across ZRA and other regulatory agencies to improve compliance.

“The absence of shared data systems presents a major obstacle for the Smart Invoicing System to deliver the level of efficiency required to improve tax compliance and revenue mobilization,” she said.

WARNING! All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.