BUUMBA CHIMBULU writes
ZAMBIA can prevent tax evasion by multinational corporations by strengthening the law on double taxation agreements.
These are agreements between two countries that reduces the tax bill for an individual who is a resident of one country but has citizenship in another country.
The agreements strives to prevent the taxpayer from paying tax to both countries.
Policy Monitoring and Research Center (PMRC) Executive Director, Bernadette Deka-Zulu, however observed that the legal provisions regarding double taxation agreements in the Income Tax Act did not adequately address issues of tax evasion.
Ms Zulu emphasised that tax evasion was another challenge facing Zambia Revenue Authority (ZRA).
She said this in the Taxation in Zambia Achievement and Challenges Infographic.
“Despite ZRA having double taxation agreements in the Income Tax Act, which was meant to deal with reciprocal taxation arrangements on multinationals and foreign residents, these provisions do not adequately address tax evasion,” Ms Zulu said.
She therefore recommended that the Company income tax be simplified as it was considered to be a complicated tax, thus making it vulnerable to tax evasion.
Ms Zulu said it was important for ZRA to simplify the tax laws to make it easier for individuals and business to understand and comply with.
Apart from addressing the challenges of double taxation agreements, she said it was important for ZRA to improve the Value Added Tax (VAT) refund administration.
Ms Zulu observed that the mining sector received 90 percent of the high tax refunds and has dictated the performance of VAT.
She said there should be greater investment in VAT administration process using Information Communication Technology (ICT) options.
Ms Zulu said there was therefore need to broaden the tax base by spreading to other sectors and individuals indicating that this was because the middle class were faced with the highest burden of taxation.
“As the economy has grown over the years, so has the informal sector which remains largely untaxed, despite ZRA having taxes specifically targeting this sector,” she said.