zambia government looses millions in uncollected tax revenue

The number of people in the informal employment in Zambia is growing day by day but the tax revenue base is not. John Masumbuko has been operating his business outside the city market for about 10 years but has never been asked to pay tax. He is not alone!

John Masumbuko leaves his home at the outskirts of the city to Soweto market where he has been earning a living for the last 10 years operating Zamcom wheelbarrow taxis. The taxis ferry goods for dealers to and from the market on a daily basis. On a good day Masumbuko makes about 40,000 kwachas and in a month about 750,000 kwachas.

He is among many joining the informal sector such as quarry miners, tax operators and open market vendors making tax free income.

Government policy faulted

According to the government policy that is currently in place anyone earning an income of above 700,000 is subjected to taxation. This is the money that is later used to develop government infrastructure such as carpeting of roads and establishing health facilities and schools. This however does not happen as there are no implementing systems in place to ensure taxes are paid. The city council Public relations manager Chanda Kakusa Makanta agrees that there are loopholes that need to be corrected.

An independent economist Mary Okudoi criticized the government policy system. She says the systems are not effective in tax collection. According to Okudoi the government looses about 60 billion Kwachas or about 900 000 dollars in uncollected tax which could be useful in development projects in the country. The government borrows heavily on donor funding and therefore increasing its external debt.

John Masumbuko, the Zamcom operator, says: ' We do not pay taxes... we do not benefit in anyway from the government '. He urged the government to assist them and create more job opportunities for them. He says he has no problem paying taxes if the government takes a bold step to improve the informal sector working conditions.

The World Bank in 2000 urged African governments to reduce the number of state employees where the governments was spending a big chunk of revenues on salaries. Those who were laid off mainly joined the informal sector where taxation policies are hardly implemented making it easy for them to evade government levies in the form of taxes.


Jane Kariuki