The document reads:
Following the call by the Ministry of Finance to stakeholders to make submissions on tax and non-tax revenue measures to be considered by Government as it prepares the 2015 National Budget and 2015-2017 Medium Term Expenditure Framework, the CMZ ... we would like to put forward the proposals below for inclusion in the overall submissions.
VALUE ADDED TAX (VAT) RULE 18
Measure: We propose amendments to Rule 18, specifically amending sub-section (ii), to read as follows:
"Rule 18 of the principal Rules is amended by the deletion of sub-rule (1) and the substitution therefor of the following:
(1) Unless the Commissioner General shall otherwise allow, a taxable supplier claiming that a supply is zero-rated under the Second Schedule to the Act on the grounds that the supply is an exportation
of goods, shall produce to an authorised officer-
i. Copies of export documents for the goods, bearing a certificate of shipment provided by the Authority or Import documentation into the next country of passage or destination provided by the customs authority of that country.
ii. Tax invoices for the goods exported;
iii. Proof of payment, made by the customer, for the goods;
iv. Documentary evidence, proving that payment for the goods has been
made into the exporter's bank account in Zambia; and
v. Such other documentary evidence as the authorised officer may
reasonably require."
a) Reason: Current VAT practice as guided by Rule 18(1) VAT (General) Rules, 1997, allows an export of goods from Zambia by or on behalf of a taxable supplier to be zero-rated, subject to provision of evidence of exportation as the commissioner general may require.
In its current format, Rule 18 prescribes, among others, the following documentary evidence to support exports:
"ii) certified copies of customs import documents at the country of destination, bearing a certificate of importation into the country of destination by the customs authority for that country;"
Finance Minister Alexander Chikwanda is expected to present the 2015 National Budget to Parliament on Friday next week.
The mining sector has had no problems producing documentation all the way up to the border or point of exit as these documents are within our control.
The mines, however, have had difficulties with fulfilling sub-section (ii) above as they sell their products to commodity traders, who have their own commercial arrangements with various customers all over the world.
In addition to the fact that they cannot trace documentation in the final country of destination for the goods as they have no access to the final customers, it is further implausible that the ZRA would demand documentation beyond what its own officers have verified as exported as indicated above, and would instead want to rely on third party documentation from other tax jurisdictions.
The failure to provide documentation required in (ii) above has resulted in the ZRA withholding huge sums of their VAT refunds, which has resulted into various operational problems with severe impact on cash flows impacting very negatively on their ability to fund critical expansion projects as well as normal operations.
Specifically, the withholding of this VAT has resulted into inability to fund critical expansion projects, corporate social responsibility projects as well as maintain cash flow to support normal operations.
CAPITAL ALLOWANCES
Measure: The capital allowances on mining plant, machinery and equipment should be reverted to 100 per cent per annum for the cost to be fully claimable within one year.
Reason: Under Section 33 of the Income Tax Act currently, capital allowances are claimable at the rate of 25 per cent on cost and upon commissioning of an asset, meaning that this cost can only be claimed
in full after four years.
In the mining industry, it is not uncommon for expansion projects to take for instance three to four years before completion and commissioning.
During this period of construction the companies will be spending money without getting any tax relief on what they spend.
Even upon commissioning of an asset, it will still take another four years for them to fully claim the related capital allowances.
PREMIUMS DISCOUNTS
Measure: The Reference Price for sale of metal products between related parties should allow adjustments for premiums and discounts that are made based on the quality of the metal products at
finalisation.
Reason: The Income Tax Act under Section 97A currently requires an adjustment of all sales between related parties to the LME price, even when the price actually charged is justified based on international best practice.
This has resulted in finalization adjustments for premiums and discounts not being taken into account, despite this being a commercial reality.
The Act should therefore be amended to permit use of alternative prices where these are commercially or otherwise justified.
EXPORT DUTY ON CONCENTRATES
Measure: The government should consider revoking the tax on concentrates exports.
Reason: The revoking of Statutory Instrument number 89 that allowed concentrate exports to be duty exempt need to be re-introduced as a good number of mines had large stocks of concentrates which for some technical reasons could not be processed locally.
These include high insol materials that may not be able to be smelted locally and Government needed to understand that the industry only exported the concentrates it could not technically and/or economically treat.
This would also help tackle the perception that companies were smuggling other metals within the concentrates.
VAT ON IMPORT OF COBALT CONCENTRATES
Measure: The Government should reintroduce permanent VAT deferment on cobalt concentrate imported.
Reason: Due to shortage of higher grade cobalt concentrate in Zambia, Zambian processing/tolling plants have to import most raw materials from the Democratic Republic of Congo to maintain cobalt production in Zambia.
Currently Zambia produces approximately seven to eight per cent of the world's cobalt metal. Over 90 per cent of this is produced from imported cobalt concentrate.
For comments call: 260 0955 431442, 0977 246099, 0964 742506 or email:jmuyanwa@gmail.com.
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