On the 28th September, 2018, Zambia’s Minister of Finance, Honourable Margaret D. Mwanakatwe, MP, presented the country’s 2019 budget to the National Assembly. The budget for the period 1st January to 31st December, 2019, under the theme “Delivering Fiscal Consolidation for Sustainable and Inclusive Growth, totalled K86.6 billion (USD 8.57 billion, at ZMW 10.10/USD, Bank of Zambia monthly average for August, 2018), of which 64.6 percent would be financed from domestic resources.
In highlighting the country’s economy performance in 2018, the Honourable Minister indicated that the economy was projected to grow at around 4 percent from 3.4 percent in 2017, which was almost at par with the global economic growth projection of 3.9 percent and higher than the 3.4 percent economic growth projection for Sub-Saharan Africa. She however noted that the trade tensions between the leading world economies, as well as the strengthening of the United States dollar against the currencies of emerging and developing economies posed downside risks to the projections.
The Honourable Minister of Finance indicated that the budget was aligned to the country’s Economic Stabilisation and Growth Programme, the 7th National Development Plan, as well as the country’s Vision 2030. She further indicated that the specific macroeconomic objectives for the 2019 budget were to: attain annual GDP growth rate of at least 4 percent; sustain inflation within the range of 6 to 8 percent; raise international reserves to at least three (3) months of import cover; increase domestic revenue to not less than 18 percent of GDP; reduce the fiscal deficit to 6.5 percent of GDP; prioritise the dismantling of arrears and curtail accumulation; and reduce the pace of debt accumulation and ensure sustainability.
In order to promote value addition to the country’s main natural resource, copper, the Honourable Minister reduced company income tax from 35 percent to 15 percent for companies that add value to copper cathodes. The Honourable Minister also introduced export duties on raw hides and skins, manganese ores and concentrates as well as on precious metals and precious stones in a bid to enhance revenue collection and promote local value addition to these resources. Among the measures announced by the Minister, which may be of interest to the business sector are the following:
- Elimination of the Value Added Tax (VAT) and reintroduction of Sales Tax;
- Introduction of measures to improve tax compliance;
- Increase in the time period covered for assessments of transfer pricing cases to a period of up to 10 years prior and an extension of the requirement to keep records to 10 years; and
- Increase in the mineral royalty rates and a provision to make mineral royalty tax non-deductible for income tax purposes.
In order to ensure that concerns raised by various stakeholders regarding the introduction of the new tax measures are addressed, the Minister of Finance announced the reconstitution and appointment of the Tax Policy Review Committee to deal with technical issues related to tax implementation matters and to ensure smooth transition from the VAT to sales tax.
For an overview of the Tax changes in the 2019 Budget click the link below.