A tax is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. The first known taxation took place in Ancient Egypt around 3000–2800 BC.
There are different kinds of taxes that are paid by citizens of different countries. Zambia is not excluded from this financial system and having been a British colony has drawn some of its measures of collecting taxes from the British way. Of particular interest on the tax issue are the expected pronouncements to be made in the National Budget Speech later this week of October 2021 by Honourable Situmbeko Musokotwane the Minister of Finance, National and Development Plan
Taxation transfers wealth from households or businesses to the government. This has effects that can both increase and reduce economic growth and economic welfare. Failure to pay taxes by the citizens reduces economic growth and welfare of the country thereby retarding development. Compliance in the paying of tax by the citizens contributes to economic growth and economic welfare and thereby playing a pivotal role in the development of the country.
Zambia has grappled with a number of challenges in the financial sector particularly on taxation. Tax evasion has been the major challenge world over and Zambia is no exceptional. Zambia has a number of taxes the government levies and one borne of contention is the PAYE. The biggest issue of interest is the tax called Pay As You Earn (PAYE) for most public service workers. PAYE is deducted from each paycheck by the employer and must be remitted promptly to the government. Currently the PAYE is at 37.5% in Zambia and with the change of government and the new government did promise to reduce the PAYE as way of giving relief to the Zambian workers. The government would do well to reduce the PAYE tax to somewhere 25 % and then go on to employ more public service workers. This would be a good move in that the increase the tax base should be the focus by the government. This is going to entail more revenue is retained by the government. Giving this relief to the public service workers would mean that these workers have more to spend and also serving for future use.
The reduction in PAYE tax would also lead to the increase in the number of citizens who would be paying the Value Added Tax (VAT). A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. If the ultimate consumer is a business that collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to, and is often compared with, a sales tax. The VAT rate is 16% and is applicable to supplies of standard-rated goods and services. The export of goods from Zambia is zero-rated. The more the citizens have to spend the more VAT is paid to the government.
There are many other taxes that citizens pay to the government. The current regime should look at reducing the Tax charged on Bet winnings also as way of drawing more citizens to into this fast developing business undertaking. The current 20% should be at least reduced to somewhere 10%. The youth have called this as youth empowerment and therefore, it should be favourable to the youth population of this country.
The development of this country depends on how committed the citizens are to remitting what is due to the government and the government should prudently utilize these funds for the benefit of all citizens in the country.
The country eagerly awaits the pronouncements in the National Budget Speech for 2022.