Zambia manufacturers raise the alarm, as small businesses decry nearly 38% increase in total tax liabilities

The Zambia Association of Manufacturers (ZAM) has raised concerns over government’s recent upward adjustment of the Turnover Tax (TOT) framework, which led to a significant increase in tax liabilities—up to 38 percent for some enterprises.

Effective January 2025, the government revised the TOT framework by adjusting the threshold from K800,000 to K5,000,000 and increasing the tax rate from four percent to five percent, while leaving the Value Added Tax (VAT) threshold unchanged.

ZAM President, Ashu Sagar, expressed concern over the increased tax burden, particularly on Micro, Small, and Medium Enterprises (MSMEs).

In a statement issued on Thursday, Sagar said an internal assessment revealed that the new tax regime had unintended consequences, with some businesses facing a 38 percent increase in total tax liabilities.

To mitigate the adverse effects on MSMEs and create a more business-friendly tax environment, ZAM proposed several reforms, including the introduction of graduated tax bands for TOT.

Sagar suggested the following graduated structure:

1. K0 to K60,000 at 0 percent (aligning with the PAYE free tax band).
2. ⁠K60,000 to K800,000 at four percent.
3. ⁠K800,000 to K5,000,000 at five percent.

This approach would protect small businesses from disproportionate tax burdens while maintaining the government’s goal of revenue mobilization.

Sagar also recommended aligning the VAT and TOT thresholds at K5,000,000 to prevent a double tax burden on businesses subject to both systems.

Additionally, he proposed raising the VAT registration threshold to K5,000,000 with voluntary registration options up to this limit.

He also expressed believe that these changes would create a more balanced taxation system and ease the financial strain on MSMEs.

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