Richmond Journal of Global Law & Business

Volume 5 | Issue 1 Article 4

2005

Efficacy of the Institutional and Regulatory

Framework for the Administration of Tax Law in
Zambia
Kenneth Kaoma Mwenda
World Bank

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Recommended Citation
Kenneth K. Mwenda, Efficacy of the Institutional and Regulatory Framework for the Administration of Tax Law in Zambia, 5 Rich. J.
Global L. & Bus. 37 (2005).
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 EFFICACY OF THE INSTITUTIONAL AND
REGULATORY FRAMEWORK FOR THE
ADMINISTRATION OF TAX LAW IN ZAMBIA

Kenneth Kaorna Mwenda*

This paper examines the efficacy of the institutional and regu-

latory framework for administering tax law in Zambia, with a view to
showing how tax law relates to the conduct of business and commerce
in that country. In many countries, including Zambia, much of tax law
is driven by legislation. This paper endeavours to flesh out the main
principles of tax law and examine the institutional framework for the
administration of tax law in Zambia. The paper does not pursue a pe-
dantic discourse of riding horses and coaches through the terraces of
the statutory provisions of every single statute on tax law. The devil is
in the detail. Indeed, tax legislation changes very quickly, especially
when new budgets are presented before parliament.' Matters that do
not change much typically include principles of tax law upon which the
new figures and facts are based.
This paper also looks at principles of both corporate and per-
sonal tax laws, and provides an exploratory study of the regulatory
framework for the administration of tax law in Zambia. An evaluation

* LLB (Zambia), BCIJMPhil (Oxford), MBA (Hull), PhD (Warwick), FCI, FRSA,
Advocate of the High Court for Zambia, Rhodes Scholar, formerly Lecturer in Law
in the University of Warwick- UK and presently, Senior Counsel, Legal Vice-Pres-
idency, the World Bank, Washington DC, USA. The interpretations and conclu-
sions expressed in this paper are entirely those of the author. They do not
necessarily represent the views of the World Bank, its executive directors, or the
countries they represent.
1 For example, under § 27 of the Zambia Revenue Authority Act 1993, the Minis-
ter may make regulations that allow for better execution of the Act's provisions.
These regulations can be repealed and replaced as other developments emerge in
the economy. Although currently out of date, other works have been written re-
garding various aspects of Zambian tax law. These works serve as a good starting
point on the discussion of tax law in Zambia. See generally E. NEwrON, ZAMBLAN
INCOME TAX: LAW AND PRACTICE (Lusaka: National Educational Co. of Zambia,
1970); A.R. DRYSDALL & E.J. LANGEVAD, THE MiNEs A-D M iERAi AC'T 1969 AND
THE MiNERPL TAX ACT 1970 ILusaka: Geological Survey Dept., 1970); ROBERT
NGOSA SIMBYAKULA, TAXATION AND ECONOMic DEVELOPMENT IN ZAMBIA (1990)(un-
published doctoral SJD dissertation, University of Wisconsin-Madison)(on file
with Journal); DELOITrE, ET AL., T-.4,TION OF MINING CCONIPANIES IN ZAAIBIA,
(Lusaka: Deloitte, Haskins and Sells, 1983); M.D. KAM%[.A\'GA. INCOME TAXATION IN
ZAMBIA: (INCORPORATING 1994 INCOME TAX (AMENDMENT ACT), (Lusaka: Zambia
Centre for Accountancy Studies, 1994).
38 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

of the efficacy of the institutional framework for the administration of

tax law is undertaken. Weaknesses in the institutional and regulatory
frameworks, such as the power of the Republican President to appoint
and dismiss the Commissioner-General at will, are highlighted
throughout this paper. An argument is made that although principles
of Zambian tax law generally appear well developed, the Zambian
Government still needs to develop an efficient and effective regulatory
framework to capture the taxation of earnings and profits from the
informal sector of the national economy.

1.0 THE INSTITUTIONAL FRAMEWORK FOR THE ADMINISTRATION OF

TAx LAw
(i) The Competent Authority
The competent authority for the administration of tax law in
Zambia is the Zambia Revenue Authority (hereinafter "ZRA"). This in-
stitution was established on March 1, 1994 pursuant to provisions of
the Zambia Revenue Authority Act 1993. ZRA is a statutory body that
includes a seal of authority.2 Section 9 of the Zambia Revenue Author-
ity Act 1993 provides as follows:
There is hereby established the Zambia Revenue Author-
ity which shall be a body corporate with perpetual suc-
cession and a common seal, capable of suing and of being
sued in its corporate name, and with power, subject to
the provisions of this Act, to do all such acts and things
as a body corporate may by law do or perform.
According to its web site, the purpose of ZRA, is "to redress the
serious shortfall in revenues available to the Government and the in-
creasing dependency on donor funding to support basic necessities."3

2 Section 13 of the Zambia Revenue Authority Act 1993 provides that: "(1) The
seal of the Authority [ZRAI shall be such device as may be determined by the Gov-
erning Board and shall be kept by the Secretary. Seal of Authority [sic], (2) The
Governing Board may use a wafer or rubber stamp in lieu of the seal, (3) The
affixing of the seal shall be authenticated by the Chairman or the Vice Chairman
and the Secretary or some other person authorized in that behalf by a resolution of
the Governing Board, (4) Any contract or instrument which if entered into or exe-
cuted by a person not being a body corporate would not be required to be under
seal may be entered into or executed without seal on behalf of the Authority by the
Secretary or any other person generally or specifically authorized by the Gov-
erning Board in that behalf, and (5) Any document purporting to be a document
under the seal of the Authority or issued on behalf of the Authority shall be re-
ceived in evidence and shall be deemed to be executed or issued, as the case may
be, without further proof, unless the contrary is proved." Zambia Revenue Author-
ity Act, vol. 18, ch. 321, § 10 (1993).
3 Zambia Revenue Authority, at www.zra.org.zm (last visited Mar. 4, 2002).
20051 FRAMEWORK FOR TAX LAW IN ZAMBIA

Hence, the goal of the Zambia Revenue Authority is to maximise tax

compliance and increase domestic revenue yield in Zambia by institut-
ing a fair, efficient and effective tax regime.
Clearly, however, the informal trading sector in Zambia has
not been captured by the policy objective specified above. There are
many traders and entrepreneurs in Zambia that continue to operate in
the informal business sector of the economy. Most business peddlers in
the informal sector are hardly taxed. This will become more clear
when we examine the principles of tax law later on in the paper. Nev-
ertheless, ZRA's Mission Statement further states that:
The mission of the Zambia Revenue Authority is to max-
imise and sustain revenue collection through integrated,
efficient, cost effective and transparent systems, profes-
sionally managed to meet the expectations of all stake-
holders. This mission statement underpins the main
responsibilities of the Authority which are to:
* Properly assess and collect taxes and duties at the
right time without causing undue burden to the
public,
* Encourage the public to come forward and pay tax
voluntarily,
* Ensure that all monies collected are properly ac-
counted for and [timely] banked,
* Properly enforce all relevant statutory provisions,
* Give advice to Ministers on aspects of tax policy,
" Facilitate international trade.4
The ZRA pledges "impartial and equitable treatment" to
the taxpayer in all dealings with regards to:
* Supply of forms (for VAT and Direct Taxes)
* Information that will assist in complying with the law
* Fairness
* Courtesy
" Prompt and efficient service
* Privacy and confidentiality of all personal and financial
information.'
The ZRA's Governing Board consists of:
(a) the Secretary to the Treasury in the Ministry re-
sponsible for finance;
(b) the Permanent Secretary in the Ministry responsi-
ble for legal affairs;

4 Zambia Revenue Authority, Responsibilities, at A-ww.zra.org.zm/responsibili-

ties.htm (last visited Mar. 4, 2002).
,5 Zambia Revenue Authority, Tax Payer Charter, at %ww.zra.org.zm/tpcharter.
htm (last visited Mar. 4, 2002).
40 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

(c) the Governor of the Bank of Zambia;

(d) a representative of the Law Association of Zambia;
(e) three persons, each representing the Zambia Con-
federation of Chambers of Commerce and Industry,
the Zambia Institute of Certified Accountants and
the Bankers' Association of Zambia; and
(f) two other members appointed by the Minister.'
It is interesting to note that, by sequencing of paragraphs, paragraph
(d) of the above statutory provision, in contrast to paragraph (e) of that
same statutory provision, places the representative of the Law Associ-
ation of Zambia before the representatives of organisations mentioned
in paragraph (e). In fact, membership of the representative of the Law
Association of Zambia, unlike membership of the other representatives
mentioned in paragraph (e), is specifically provided for in a separate
paragraph. That said, both categories of members cited in paragraphs
(d) and (e) of the above statutory provision are nominated by their re-
spective organizations. 7 Thereafter, the Minister formally appoints the
members.S
On a related, but critically more important note, public concern
has it that it would beneficially serve the Zambian public if the Zambia
Revenue Authority Act 1993 were amended so as to include statutory
provisions on the professional and academic qualifications and the re-
quired nationality of the two individuals that are nominated and ap-
pointed to the Governing Board. Experience, so far, suggests that even
foreigners of dubious professional and academic backgrounds can be
appointed by the Minister to the Governing Board; that is, if they have
not, in fact, by now (or in the recent past) already been appointed to
the Board.
Whereas the Zambia Revenue Authority Act 1993 clearly stipu-
lates that the Chairman and Vice-Chairman of the Governing Board
are to be elected by Board members themselves,' in practice, experi-
ence has shown hitherto that the Minister is the one who appoints the
Chairman of the Governing Board.' ° Only the Vice-Chairman is
elected by members of the Governing Board." It is not easy to compre-
hend why the Minister has amassed so much power. Indeed, although
the Zambia Revenue Authority Act 1993 does not expressly provide for
regulations to govern the election of the Chairman and Vice-Chairman

6 Zambia Revenue Authority Act, supra note 2, at § 10.

7 Id. at § 10(2).
8 id.
9 Id.at § 10(3).
o This evidence was obtained from a reliable source at ZRA. The source, however,
elected to remain anonymous for purposes of this report.
1 Id.
20051 FRAMEWORK FOR TAX LAW IN ZAMBIA

of the Governing Board, § 15(1) of the statute spells out the power of
the Governing Board to regulate its own procedure. 2 Election proce-
dures can, therefore, be prepared pursuant to § 15(1) of the Zambia
Revenue Authority Act 1993.
Throughout ZRA's entire existence, the Governing Board has
passed through the hands of more than one Chairman. Public percep-
tion, so far, is that the holder of the position of Chairman of the Gov-
erning Board can only remain in office if he or she does not dissent or
disagree with "the powers that be." Thus, the Chairman of the Gov-
erning Board often ends up towing the political line and forgetting
about professionalism. As a result, it is almost unimaginable to think
of the Chairman of the Governing Board as one who is politically inde-
pendent in the performance or discharge of his official duties.
Furthermore, the remuneration and allowances of members of
the Governing Board are paid in accordance with dictates of the Minis-
ter. 3 Here, the lack of a specific formula or criteria for determining
the remuneration and allowances of members of the Governing Board
provides room for potential abuse of power. The Minister can, if he
wants, peg the salary structure and the attendant allowances of any
Board member that is not towing the line on less favourable terms
than those accorded to other Board members. To avert such a threat,
there is need to amend the law or have some regulations which spell
out the specific criteria for determining the remuneration and al-
lowances of Board members.

(ii) Functions of the Governing Board of ZRA

Although the Governing Board of ZRA is vested with statutory

powers to assess, charge, levy, and collect all revenue due to the Gov-
ernment (under such laws as the Minister may specify by statutory
instrument),1 4 it is actually ZRA that has statutory powers to give ef-
fect to the laws specified by the Minister." The Governing Board has
powers to ensure that all revenue is collected as soon as reasonably
practicable and is credited to the Treasury.1 6 In pursuance of this ob-
jective and, with permission to make some necessary "modification" to
the following statutory rule, the Governing Board is required to ob-
serve as follows:

12 Similarly, § 16(3) of the Zambia Revenue Authority Act provides that "[slubject

to any specific or general direction of the Governing Board, any committee estab-
lished ... may regulate its own procedure."
13 Zambia Revenue Authority Act, supra note 2, at § 14.
14 Id. at § 11(1).

13 Id. at § 11(2).
16 See id. at § 11(1).
42 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

(1)
The Governing Board shall cause to be kept proper
books of account and other records relating to the
Accounts of the Authority ("ZRA").
(2) The accounts of the Authority shall be audited an-
nually by independent auditors appointed by the
Authority.
(3) The Auditors' fees shall be paid by the Authority.17
The statute does not, however, spell out what constitutes the term
"necessary modification," as contained in § 11(1)(b) of the Zambia Rev-
enue Authority Act 1993. A further obligation on the Governing Board,
with similar permission to make some "necessary modification," is
that:
(1) As soon as practicable, but not later than six
months after the expiry of the financial year, the
Governing Board shall submit to the Minister a re-
port concerning its activities during that financial
year.
(2) The report referred to in subsection (1) shall include
information on the affairs of the Authority ("ZRA")
and there shall be appended to the report
(a) an audited balance sheet;
(b) an audited statement of income and expendi-
ture; and
(c) such other information as the Minister may
require.
(3) The Minister shall, not later than seven days after
the first sitting of the National Assembly next after
the receipt of the report referred to in subsection (1),
lay it before the National Assembly and publish it
as soon as reasonably practicable thereafter."1
Again, no definitions of the phrases "necessary modification" and "as
soon as practicable" are provided. Be that as it may, a third function of
the Governing Board of ZRA is to perform such other functions as the
Minister may determine in line with the Board's powers to assess,
charge, levy, and collect all revenue due to the Government.19 On the
one hand, while such discretionary powers in the Minister can provide
helpful "constructive ambiguity" to strengthen the regulatory frame-
work where there is a lacuna in the law, the same discretionary power,
on the other hand, can be used for political ends to target individuals
that are not in good books with the Government. A notorious fact in
Zambia is that there has been public outcry that ZRA is sometimes

17 Id. at § 24.
18 Id. at § 25.
19 Id. at § 11(1)(c).
20051 FRAiMEWORK FOR TAX LAW IN ZAMBIA

used by the Movement for Multi-Party Democracy Government to har-

ass and victimise political opponents of the Government. To illustrate,
shortly after the 1996 Presidential and Parliamentary Elections in
Zambia, a local human rights body, that was part of the team of elec-
tion observers, was subjected to political victimisation by ZRA. As the
Human Rights Watch observes:
The Foundation for Democratic Process (FODEP), which
also concluded that the elections were not free and fair,
was also targeted by the government. FODEP had re-
ceived tax-exempt status from the Zambia Revenue Au-
thority (ZRA) because it was operating on a grant aimed
at strengthening the democratic process, including elec-
tion monitoring of parliamentary and local government
elections. But on December 19, it received a tax demand
for outstanding tax arrears for K27 million (approxi-
mately U.S.$21,000): shortly afterwards, tax authorities
confiscated all of the funds in FODEP's bank account.
Many commentators have indicated, time and again, that ZRA has
been unleashed to finish off political opponents of the Government.
Such political gimmicks and manoeuvres are often orchestrated
through the use of excessive tax scrutiny, done on a prejudicial and
selective basis, so as to finish off financially and politically those that
are in disagreement with the Government or the "powers that be."
The 'Minister may, as he considers necessary or expedient, also
give to the Governing Board general directives with respect to the car-
rying out of the Board's functions under the Zambia Revenue Author-
ity Act 1993.21 The Board is required to give effect to such directives.2 2
The Board may also "delegate to the Commissioner or to any member
or committee, the power and authority to carry out, on behalf of [ZRAJ,
such functions of the Board as the Board may determine. '112 3 In addi-
tion, the Governing Board may "delegate to the Commissioner-General
or to any member or committee, the power and authority to carry out,
on behalf of [ZRAI, such functions of [ZRAI as [ZRAI may determine."24

(iii) Term of Office on the Governing Board

The following members of the Governing Board of ZRA are per-
mitted to hold office for a period of three years from the date of ap-

o See Human Rights Watch, Zambia: The Reality Amidst Contradictions -

Human Rights Since the 1996 Elections, vol. 9, no. 3(A)(July 1997), available at
http.//www.hrw.org/reports/1997/zambia/Zambia.htm (last visited Mar. 11, 2002).
21 See Zambia Revenue Authority Act, supra note 2, at § 11(2).
22 Id.
2 Id. at § 11(3).
24 Id. at § 12(5).
44 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

pointment and may be re-appointed for one further term: "(a) a

representative of the Law Association of Zambia; (b) three persons,
each representing the Zambia Confederation of Chambers of Com-
merce and Industry, the Zambia Institute of Certified Accountants and
the Bankers' Association of Zambia; and (c) two other members ap-
pointed by the Minister." 5
Whereas by virtue of their office the Permanent Secretaries of
the Ministries of Legal Affairs and Finance and the Governor of the
Bank of Zambia are not permitted to resign membership of the Gov-
erning Board, the other members of the Board, including the two polit-
ical appointees of the Minister, may resign upon giving one month's
notice in writing to the organization which nominated them and to the
Minister.2" However, in the case of the two political appointees, notice
in writing to the Minister is sufficient since there is no organization
which nominated either of them."
The office of a member of the Governing Board will become va-
cant "(a) upon his death; (b) if he is absent without reasonable excuse
from three consecutive meetings of the Governing Board of which he
has had notice; (c) on ceasing to be a representative of the organisation
which nominated him; (d) if he is an undischarged bankrupt; or (e) if
he contravenes section seventeen" of the Zambia Revenue Authority
Act 1993, which deals with Disclosure of Interests.28
The validity of proceedings, acts, or decisions of the Governing
Board are not affected by any vacancy in the membership of ZRA or by
any defect in the appointment of any member of the Governing Board
or by reason that any person not entitled to do so took part in the
proceedings.29

(iv) Conduct of Administrative Business by the Governing Board

The Governing Board of ZRA is required to meet for the trans-
action of business at least once every month, at such places and at
such times as the Chairman may determine. ° A meeting of the Gov-
erning Board can be called by the Chairman upon giving notice of four-
teen days or more.3 1 If the urgency of any particular matter does not
permit the giving of such notice, special meetings can also be called
upon giving a shorter notice if five or more members of the Governing

25 Id. at § 12(1)(d)-(0.
26 Id. at § 12(2).
27 Id. at § 12(4)
28 Id. at § 12(3). See infra p. 11 (discussing disclosure of interests by members of

the Governing Board).

29 See Zambia Revenue Authority Act, supra note 2, at § 15(8).
30 Id. at § 15(2).
31 Id.at § 15(3).
2005] FRAMEWORK FOR TAX LA IV IN ZAMBIA

Board request a meeting in writing.3 2 In either case, the notice of the

meeting should be in writing, since verbal notice will not suffice. 3
Seven members of the Governing Board form the quorum at
meetings of the Governing Board. ' At such meetings, the following
person presides:
(a) the Chairman; or
(b) in the absence of the Chairman, the Vice-Chairman;
or
(c) in the absence of the Chairman and the Vice-Chair-
man, such member as the members present may
elect for the purpose of that meeting.3 5
Decisions of the Governing Board on any question are made by a ma-
jority of members present and voting at the meeting. In the event of a
split vote, the person presiding at the meeting is permitted to make a
casting vote in addition to his deliberative vote."' The law is not clear
however as to whether a member of the Governing Board who is pre-
sent at the meeting may vote through a proxy. Further, there are no
statutory provisions in the Zambia Revenue Authority Act 1993 for ap-
pealing decisions of the Governing Board on tax related matters. Can a
court of law, for example, over-turn decisions of the Governing Board
or ZRA? If so, do the courts have the power to look into the merits of
the arguments advanced by the Governing Board or ZRA in reaching
its decision? Or, is the court confined merely to a determination as to
whether the Governing Board or ZRA acted in good faith and complied
with the procedural requirements under the law? The statute is silent
on such matters. We are left only to look at provisions of the Revenue
Appeals Tribunal Act of 1998. which sets up the Revenue Appeals Tri-
bunal.3" The jurisdiction of this tribunal relates mainly to appeals
made pursuant to legislation on income tax, value added tax, and cus-
toms and excise levies.
Under the Zambia Revenue Authority Act 1993, the Governing
Board has "power to invite any person whose presence is in its opinion

32 Id.
3a The statute is very clear it does not provide for a verbal notice. See id.
34 See id. at § 15(4).
3-5Id. at § 1515).
36 Id. at § 15(6).
37 One school of thought in Zambia postulates that the Revenue Appeals Tribunal
is almost inept due to poor funding from the Treasury. Poor funding is seen by
many as significantly affecting the Tribunal's capacity to function effectively and
efficiently. It is suggested here that the Revenue Appeals Tribunal could benefit
more, and perhaps perform much better, if it were funded directly from revenues
collected by ZRA or if it were permitted to levy administrative fees on parties to
disputes before it.
46 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

desirable to attend and participate in the deliberations of a meeting" of

ZRA, but such a person has no right to vote at the meetings.' 8 Minutes
of the meetings are required to be kept properly." 9 This obligation ap-
plies also to minutes of committee meetings.4 ° The Governing Board
may, for purposes of performing its functions, establish committees of
members of ZRA and delegate to such committees functions it sees
fit."' Also, ZRA, like any other organisation, has departments which
carry out its functions.
Initially, when ZRA was set up, it was organised as a body cor-
porate around operational departments such as the departments of Di-
rect Taxes, Customs and Excise, and Value Added Tax (VAT).4 2 ZRA
also has three corporate divisions: Finance, Human Resources and
Support Services.4 3 In addition, there are other departments that deal
mainly with legal services, information technology, and internal au-
dit.4 4 Today, ZRA is organised institutionally along the following lines:
The Authority ("ZRA") is a corporate autonomous body
funded through the National Budget. Its structure com-
prises three operational divisions - Customs and Excise,
Direct Taxes and Value Added Tax. The Treasury func-
tions are incorporated in the Finance Division. There are
several supporting directorates, namely, Administration,
Human Resources, Legal, Information Technology, Inter-
nal Audit, Internal Affairs and the Executive Support
Unit. .. The stakeholders in the operations of the Zambia
Revenue Authority include:
* The Zambian people, as represented by the ZRA Gov-
erning Board and by the Government and its
agencies
" Parliament
* The Zambian business community and those groups
which represent their interests, together with their
professional advisors
* Banks and other financial institutions
* Taxpayers in general

38 See Zambia Revenue Authority Act, supra note 2, at § 15(7); see also id. at
§ 16(4) (providing that "[a] committee may invite any person whose presence is in
its opinion desirable to attend and participate in the deliberations of a meeting of
a committee, but such person shall have no vote").
39 See id. at § 15(9).
40 Id.
41 Id. at § 16(1); see also id. at § 16(2) (allowing the Governing Board of ZRA to
appoint the Commissioner-General as a member of any such committee).
42 See Zambia Revenue Authority, supra note 3, at "Corporate Profile."
43 See generally id.
44 See generally id.
20051 FRAMEWORK FOR TAX LA IV IN ZAMBIA

* Members of COMESA, SADC, WTO and other coun-

tries transacting business with Zambia, or transiting
goods through Zambia
* Tourists. travelers and traders crossing Zambia's
borders.
" The donor community and multilateral agencies, e.g.
IMF. World Bank. DFID
* Staff and others within the ZRA
* The mass media in general
* NGO's and other interest groups1 5

(v) Disclosure of Interests by Members of the Governing Board

As a general rule, any person present at a meeting of the Gov-

erning Board of ZRA or at any committee of ZRA during which a mat-
ter to be considered directly or indirectly interests that person or his
spouse in a private capacity is required, "as soon as practicable after
the commencement of the meeting, to disclose such interest." 6 It is not
clear, however, what is meant by -as soon as practicable." When can it
be said that a disclosure was or has been made at a reasonably practi-
cable time and opportunity? There is indeed a lacuna in the law here.
The law simply requires that such disclosure be recorded in the min-
utes of the meeting.4 7 Further, the Zambia Revenue Authority Act
1993 does not stipulate any penalties for non-disclosure. The only
threat of sanction that could arise in the event of non-disclosure is that
found in § 3 of the Act, prohibiting a culpable person from retaining or
holding office as member of the Governing Board. But is such a provi-
sion sufficient to provide incentives for interested parties to disclose
their interests?
Section 17(1) of the Zambia Revenue Authority Act 1993 goes
further to prohibit interested persons from taking part in any consid-
eration or discussion of, or voting on, any questions touching on the
subject matter in which they are interested. But, again, there are no
sanctions in the event of non-disclosure. That said, a waiver to permit
interested persons to take part in or vote on the discussion can only be
granted by ZRA. 4 s The Act, nonetheless, does not spell out the grounds
upon which such a waiver can be made. It appears ZRA has unfettered
powers to grant waivers.

45 See generally id. However, at the time this report was written, the ZRA re-
vealed that the information on this external web site was outdated. Hence, the
information provided herein presents the current state of affairs.
46 Zambia Revenue Authority Act, supra note 2, at § 17 1).
47 Id. at § 17(2).
48 Id. at § 17(1).
48 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

There are some general rules prohibiting the disclosure of in-

formation on matters pertaining to operations of ZRA. These rules can
be found in §21 of the Zambia Revenue Authority Act 1993. Section 21
of that Act reads:
(1) No person shall, without the consent in writing
given by or on behalf of the Authority ("ZRA"), pub-
lish or disclose to any person, other than in the
course of his duties, the contents of any document,
communication or information whatsoever, which
relates to, and which has come to his knowledge in
the course of his duties under this Act.
(2) Any person who knowingly contravenes the provi-
sions of subsection (1) shall be guilty of an offence
and shall be liable, upon conviction, to a fine ... or
to imprisonment for a term not exceeding five years
or to both.
(3) If any person having information which to his
knowledge has been published or disclosed in con-
travention of subsection (1) unlawfully publishes or
communicates any such information to any other
person, he shall be guilty of an offence and shall be
liable, upon conviction, to a fine not exceeding.., or
to imprisonment for a term not exceeding three
years, or to both.4 9
A notable shortcoming of the above statutory provision is that the
word "knowledge" is not defined anywhere in the Act. As a result, it is
difficult to appreciate what constitutes "knowingly" contravening the
law. That said, § 21 of the Zambia Revenue Authority Act 1993
continues:
(4) Nothing in this section, in section one hundred and
seventy-five of the Customs and Excise Act (Cap
662) or in section eight of the Income Tax Act (Cap
668), shall prevent the passing of information be-
tween the Departments or between the Depart-
ments and the Governing Board or between the
Departments and the Authority. °
Sections 3 to 8 of the Zambia Revenue Authority Act 1993 provide for
the disengagement of Departments of Taxes and of Customs and Ex-
cise and other incidental matters. Assets and liabilities of the Depart-
ments are transferred to ZRA. The registration of property transferred
by the Departments to ZRA is also provided for by the Act. Further-

49 Id. at § 21.
50 Id.
20051 FRAMEWORK FOR TAX LA IV IN ZAMBIA

more, the continuation of legal proceedings against either of the two

Departments in the name of ZRA is legislated by the Act. Further, § 26
of the Zambia Revenue Authority Act 1993 then spells out as follows:
Subject to the provisions of this Act, any right of any per-
son, including a right of appeal, subsisting against the
Commissioner of Taxes, the Commissioner of Sales Tax
or the Controller of Customs and Excise immediately
before the commencement of this Act shall after com-
mencement be treated as subsisting against the Commis-
sioner-General in so far as that right relates to the duties
of the Commissioner-General under this Act."'
Sadly, there is no legal obligation on ZRA to provide employment to all
former employees of the now defunct Departments of Taxes and Cus-
toms and Excise. There is also no statutory provision in the Zambia
Revenue Authority Act 1993 for the Government or ZRA to compen-
sate former employees of the defunct Departments who are now unem-
ployed as a result of the Departments' dissolution and the creation of
ZRA.

(vi) JudicialImmun i't of Members of the Governing Board

To promote the independence of members of the Governing

Board and members of committees of ZRA in their performance of offi-
cial duty, the Zambia Revenue Authority Act 1993 provides as follows:
No action or other proceedings shall lie or be instituted
against any member [of the Governing Board] or member
of a committee for or in respect of any act or thing done
or omitted to be done in good faith in the exercise or pur-
ported exercise of his functions under this Act.5 2
The omission or act must have been made in good faith and in the
course of business to seek the protection of the law under § 18. Argua-
bly, however, the statutory provision does not exempt an individual
from liability where he or she engages in an act or omission that in-
volves gross negligence since, by its very nature, gross negligence mili-
tates against the concept of "good faith." Indeed, a statutory provision,
such as § 18 above, can help to boost the morale and confidence of both
the staff of ZRA and members of the Governing Board or members of
ZRA committees.

5' Id. at § 26.

5.2 Id. at § 18.
50 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

(vii) Office of the Commissioner-Generaland its Compromised

Independence
It is not clear why the Commissioner-General of Taxes must be
appointed by the Republican President.5" Further, the President has
the power to dismiss the Commissioner-General, yet the Zambia
Revenue Authority Act 1993 does not state the grounds upon which
the Commissioner-General can be fired. It appears, most likely by de-
sign of the draftsman, and less likely by default, that the statute was
drafted to remain mute on this matter. Such wide discretionary pow-
ers provide a nesting ground for uncontrolled and arbitrary despotic
powers of the executive. Indeed, one would have thought that parlia-
ment was a more appropriate body to appoint the Commissioner-Gen-
eral so that the Commissioner-General could be independent in the
discharge of his official duties. But, as it is, the man is at the beck and
call of the President. Indeed, § 19 of the Zambia Revenue Authority
Act 1993 provides as follows:
(1)Subject to subsection (2), the President shall ap-
point a Commissioner-General, who shall be the
chief executive officer of the Authority ("ZRA"), and
who shall be responsible for the execution of the
functions of the Governing Board and the imple-
mentation of the decisions of the Board...
(3) The Commissioner-General shall be removed by the
President.5 5
There are no statutory provisions in the Zambia Revenue Authority
Act 1993 to control the powers of the President here. Be that as it may,
the Commissioner-General has statutory powers, subject to approval
of the Governing Board, to establish organisational structures he con-
siders necessary to discharge the functions of the Governing Board.
Thus, suffice it to say that if the Republican President decides secretly
to instruct the Commissioner-General to abolish a particular office in
ZRA, because the office is held by an individual that the President
does not like, then all hell breaks loose for that fellow. Of course, the
Commissioner-General is less than likely to say "no" or to stand his
ground since the President is the appointing and dismissing authority
for his position. Further, because the President is not restrained by
any statutory provisions in the Zambia Revenue Authority Act 1993 to
hire and fire a Commissioner-General, the more likely that the Com-
missioner-General would end up acting "politically correct." The
Zambia Revenue Authority Act 1993 does not spell out the required

' Id. at § 19(1).

54 Id. at § 19(3).
.55 Id. at § 19.
20051 FRAMEWORK FOR TAX LAW IN ZAMBIA

professional qualifications of a Commissioner-General. No doubt, all

indications are that the infinite wisdom of making appointments to the
office of Commissioner-General rests entirely in the bosom of the Re-
publican President.
A secretary to ZRA, appointed by the Governing Board and on
56
such terms and conditions as the Board may determine, is responsi-
ble for the administration of the day-to-day affairs of the Governing
57
Board under the general supervision of the Commissioner-General.
Similar to the situation with the Commissioner-General, it is easy for
the Republican President to exert political pressure and influence on
the Secretary to ZRA. All he has to do is issue instructions to the Com-
missioner-General and then all rank and file begin to run around.
The Governing Board has powers to appoint, on such terms
and conditions as it determines, other staff members it considers nec-
essary for the performance of its functions. " Such members of staff
are required to exercise functions and perform duties conferred upon
them by the laws specified by the Minister relating to functions of the
Governing Board, or as delegated or assigned to them by the Commis-
sioner-General.

(viii) The Financing of ZRA

Section 22(4) of the Zambia Revenue Authority Act 1993 pro-
vides that the Executive Board may invest non-revenue funds not im-
mediately required for the performance of its functions in such manner

-56 Id. at § 20(1).

57 Id. at § 20(2).
5 Id. at § 20(3).
59 See d. at § 20(4); see also The Value Added Tax Act, Laws of the Republic of
Zambia, vol. 19, ch. 331, §§ 33-34 (1995) (vesting power in ZRA and the Commis-
sioner-General to administer the law spelt out in those pieces of legislation.) For
example, chapter thirty-three of the Act provides: "(1) The Authority [ZRA] shall
be responsible for the administration of this Act and for the charging, levying and
collection of tax. (2) The Minister may approve the establishment by the Authority
of a reserve account with the Bank of Zambia for the payment therefrom of any
credits under section nineteen, and from tax collected under this Act, the Author-
ity shall from time to time appropriate sufficient funds to meet the requirements
of the reserve account. (3) Except as provided by sub-section (2), tax collected
under this Act shall be credited to the Treasury as soon as is reasonably practica-
ble, and the provisions of sections twenty-four and twenty-five of the Zambia Reve-
nue Authority Act, shall apply in respect of revenue derived from tax under this
Act." Further, chapter thirty-four of the Act provides: "(1) The Commissioner-Gen-
eral shall have and may exercise and perform the powers and functions conferred
on him by or under this Act.(2) The Commissioner-General may delegate any of his
functions under this Act to the Commissioner of Value Added Tax or other officers
of the Authority."
52 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

as it thinks fit. However, it is not clear whether or not the title "Execu-
tive Board" refers to the Governing Board. Apart from § 22(4) of the
Act, the title "Executive Board" is nowhere in the statute. The failure
to define "Executive Board" in the drafting of this legislation causes
some illogical difficulties.
ZRA is financed from the following three major sources: (a)
moneys appropriated by Parliament for ZRA; (b) grants or donations to
ZRA; and (c) moneys that may vest in or accrue to ZRA.6 ° ZRA is per-
mitted by law to accept money by way of grants or donations from any
source in Zambia.6" This statutory right for ZRA to receive financial
donations is not qualified. There is no statutory obligation under the
Zambia Revenue Authority Act 1993 for ZRA to take a cautious ap-
proach, such as the "know your customer" principle to curb money
laundering activities. In short, ZRA can receive laundered money or
financial bribes, as long as such receipts are dressed up as grants or
donations. There is need to amend the law here.
ZRA also has the power to raise money by way of loans or oth-
erwise from any source in Zambia and, subject to the approval of the
Minister, from any source outside Zambia.62 Again, the law here
should try and introduce some screening mechanism so that ZRA is
never suspected of receiving ill-gotten wealth. Additionally, ZRA has
the power to charge and collect fees for the programmes, publications,
seminars, consultancy services and other services it offers.6 3 From
these funds, the following expenses and costs must be met:
(a) the salaries, allowances and loans of the staff of
ZRA;
(b) such reasonable travelling, transport and subsis-
tence allowance for members of any committee of
the Governing Board when engaged on the business
of the Board at such rates as the Board may deter-
mine; and
(c) any other expenses incurred by ZRA in the perform-
64
ance of its duties.
Ideally, since ZRA is a public entity, and because much of its finances
come from parliamentary allocations, ZRA should be required by law
to publish quarterly as well as annual accounts. Presently, ZRA is only
required to publish annual accounts, however a requirement to have
ZRA publish both quarterly and annual accounts would ensure en-
hanced transparency and accountability. Additionally, this require-

60 Zambia Revenue Authority Act, supra note 2, at § 22(1).

61 Id. at § 22(2)(a).
62 Id. at § 22(2)(b).
63 Id. at § 22(2)(c).
64 Id. at § 22(3).
2005] FRAMEWORK FOR TAX LAW IN ZAMBIA

ment would promote good corporate governance in ZRA. In the past,

the Zambian public has been concerned that some senior members of
the ruling MMD party have drawn funds directly from ZRA for their
private and personal use.
The financial year of ZRA ends on December 31.65 The Gov-
erning Board is required to keep proper books of account and other
records relating to the accounts of ZRA.66 The accounts are audited
annually by independent auditors appointed by ZRA,6 7 and the audi-
tors' fees are paid by ZRA.6 s

2.0 PRINCIPLES OF TAX LAW

The development of tax law in Zambia, like in many other com-
mon law jurisdictions, has been primarily influenced by public policy
theory and the development of legislation and case law. International
law also has had a bearing on the development of tax law in Zambia,
as Zambia has double-taxation agreements with countries such as Ca-
nada, Denmark, Finland, Germany, the Netherlands, Kenya, Norway,
Romania, India, Ireland, Italy, Japan, Sweden, Switzerland,
Tanzania, Uganda, and the United Kingdom. 69 In general, double-tax-
ation agreements generate norms of conventional international law
which have a bearing on the development of municipal law. Addition-
ally, Zambian legislation does provide several tax incentives to foreign
investors. 70 A discussion of tax-related incentives falls outside the
scope of this study. Suffice it to say, principles of Zambian tax law
have evolved, and precepts based mainly on public policy and interna-
tional law have been enjoined providing grounds for the advancement
and development of tax law in Zambia. Following below is a discussion
of some of the principles of tax law in Zambia.
The Direct Tax Division of ZRA administers three types of
taxes. 71 These taxes are income tax,
7
mineral royalty tax and property
transfer tax. In the words of ZRA: 1

65 Id. at § 23.
66 Id. at § 24(2).
67 Id. at § 24(2).
Id. at § 24(3).
6 See generally Zambia Revenue Authority, Tax Treaties, at http//www.zra.org.
zm/dtax/treaties.htm (last visited Mar. 5. 2002).
71 See generally The Investment Act, Laws of the Republic of Zambia, vol. 21, ch.

385 (1993) (delineating tax incentives).

-1 See generally Zambia Revenue Authority, Direct Taxes, at http'/Aww.zra.org.
zmn/dtax/dtintro.htm (last visited Mar. 5, 2002).
72 See id. More recently, a revised note from ZRA's intra-net reads: "Direct Taxes

Division of the Zambia Revenue Authority is charged with the responsibility of

assessing and collecting the following tax types: (a) income Tax; (b) Property
Transfer Tax; and (c) Mineral Royalty Tax. The taxes administered here are re-
54 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

Charge To Tax: Tax is charged to each person who re-

ceives income from a source within Zambia, while tax is
collected by way of interest and dividends from each per-
son who is ordinarily a resident within Zambia but re-
ceives income from a source outside Zambia.
Pay As You Earn (PAYE): PAYE is a method of collect-
ing Income Tax from individuals in gainful employment.
The employer will deduct a certain amount of tax from
the employee's salary or wages on each payday then re-
mit the tax to the Authority. This method enables the
employee to avoid paying taxes at the end of the charge
year and also shifts the burden of responsibility to the
employers. Every resident individual who receives in-
come is granted a tax credit or tax relief from the Author-
ity. The total tax credit is spread evenly during the
charge year. At the end of the year, an assessment will
be made on the individual's total income received from
various sources. Should the tax credit be less than the
actual tax paid during the year, the balance of the tax
due will be payable to the Authority. Effective April 1,
1998, the applicable tax rates and credit for individuals
are as follows:
Chargeable income per annum

ferred to as "direct taxes" because the tax incidence is borne directly by the person
receiving the income unlike indirect taxes which are imposed on goods and ser-
vices. Under the Income Tax Act (Cap 323), tax is charged on income received by
every person from a source within Zambia. Certain types of income from sources
outside Zambia, e.g. interest and dividends, also attract tax on persons ordinarily
resident in Zambia.
PersonalIncome Tax Rates: The following rates of tax are currently applicable on
personal income taxes i.e. tax on self employed individuals and employed individu-
als: Chargeable Annual Income - Tax Rate: First K1, 600, 000 @ 10%; Next K600,
000 @ 20%; Balance @ 30%; Tax credit applicable is K144, 000
Company Tax Rates: On income from Lusaka Stock Exchange listed companies@
30%. On income from other companies @ 35%. For banks registered under the
Banking and financial Services Act - The first K250, 000, 000 @ 35%; the balance
@ 45%. For farming income @ 15%. For income from non traditional exports @
15%. For income of Trusts, Deceased or Bankrupt Estates @ 35%. On income from
the chemical manufacture of fertilizers @ 15%. On income from rural enterprises:
The tax chargeable is reduced by one seventh for a period of five years.
Withholding Tax Rates: (a) Individuals: Dividends (final tax) @ 15%; Interest (final
tax) @ 25%; Royalties, Management and Consultancy Fees @ 15%; Rents @ 15%;
Commissions @ 15%. (b) Persons other than individuals: Dividends (final tax) @
15%; Interest (not final) @ 15%; Royalties, Management and Consultancy fees @
15%; Commissions @ 15%. (c) Other payments: Non resident contractors @ 15%;
Public entertainment fees (non residents only) @ 15%."
20051 FRAMEWORK FOR TAX LAW IN ZAMBIA

First K1, 200,000 10'

Next K600,000 20%
Balance 30%
Tax Credit K84,000
Company Tax: Company Tax is a form of income tax
that is levied on companies with limited liability. The tax
rate is currently at 357 of the profits, adjusted for tax
purposes. Companies listed on the Lusaka Stock Ex-
change market pay tax at a reduced rate of 30%. The tax
rates on income from banking activities are:
* Income up to K250,000,000 35%
" Income in excess of K250,000,000 457
" Income earned from the chemical manufacture
of fertilizer and farming by any person
(including companies) suffers a tax rate of
1517.v
ZRA further states that:
Provisional Tax: Provisional Tax is a quarterly advance
payment of tax due based on estimated income for the
current year. Any person in receipt of income, other than
emoluments subject to PAYE, is required to pay provi-
sional tax on the following dates:
* First Installment June 30
" Second Installment September 30
* Third Installment December 30
* Fourth Installment March 3071
Withholding Tax (WHT) is deducted at the source from the fol-
lowing sources of income: rents, interest, dividends, royalties, manage-
ment fees, and payments made to non-resident contractors who are
engaged in construction and haulage.7 5 In 2003, the rate of WHT on all
types of income was 15%, except on interest and dividends paid by suc-
cessor companies of Zambia Consolidated Copper Mines Plc., where
the rate is pegged at 10%.76 In Zambia, WiT is not the final tax, ex-
cept in the case of dividends.7 7 For example, in the case of rental in-
come, the tenant is required to deduct WHT from the gross rental

73 See Zambia Revenue Authority, Direct Taxes, Companies, at httpJ/zra.org.zm/

dtax/companies/htm (last visited Mar. 5, 2002).
74 Zambia Revenue Authority, Direct Taxes, Provisional Tax, at httpJ/zra.org.zm/
dtax/corporate tax.htm (last visited Mar. 5, 2002).
v Zambia Revenue Authority, Direct Taxes, Withholding Tax, at http'J/zra.org.
zm/tax credits.htm (last visited Mar. 5, 2002).
76 Id.
77 Id.
56 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

charge and remit the tax to ZRA on behalf of the landlord."8 If this is
not done, the tenant will be held accountable for failing to comply with
the law and severe penalties will be enforced. The landlord will also be
liable for the tax due on the gross rent (less allowable expenses), with-
out being granted relief for withholding tax.
Base Tax, on the other hand, is a presumptive tax levied on
small scale businesses that are unable to maintain adequate business
records on which to base a correct tax assessment at the end of the
charge year. By 2003, Base Tax was fixed at 266 penalty units which
was then equivalent to K47,880 per annum.
Mineral Royalty Tax: Mineral Royalty Tax is a 2% tax levied
on all holders of a large scale mining licenses on the net back value.7 9
"Net back value" means the market value of minerals free on board at
the point of export from Zambia, or in the case of consumption within
Zambia, at the point of delivery within Zambia, less:
* the cost of transport from the mining area to the
point of export or delivery, including insurance and
handling charges; and
* the cost of smelting and refinery; and
* the cost of refining or other processing costs, except
such processing costs as relate to processing normally
carried out in the mining area of Zambia.
In this case, "market value" means the realized price for a sale free on
board at the point of export from Zambia or at the point of delivery
within Zambia. °
Property Transfer Tax: There is no capital gains tax in Zambia.
However, there is a Property Transfer Tax of 2.5% which is charged on
the realizable value of the property being transferred."1 The tax is pay-
able by the transferor. In this case, "property" includes:
* Any land (including any buildings, structures, or
other improvements thereon); and
* Any share issued by a company in Zambia that is not
listed on the Lusaka Stock Exchange.
Losses: A loss incurred in a charge year can only be deducted from
income of the same source and of the same person. Until March 31,
1997, the loss could be carried forward indefinitely and set against fu-
ture income of the same source. Effective April 1, 1997, losses can only

78 Id.
79 Zambia Revenue Authority, Direct Taxes, Mineral Royalty, at http://zra.org.zi/
dtax/mineral-royalty.htm (last visited Mar. 5, 2002).
80 Id.
S1 Zambia Revenue Authority, Direct Taxes, Property Transfer Tax, at http://zra.
org.zm/dtax/property-transfer.htm (last visited Mar. 5, 2002).
20051 005FR-EWORK FOR TAX LAW IN ZAMBIA

be carried forward for five charge years after the charge year in which
they are incurred. Owing to these restrictions on carrying forward five
years, losses brought forward March 31, 1997 are deemed to have been
incurred in the charge year ending March 31, 1997. However, losses
incurred by former Zambia Consolidated Copper Mining Companies,
sold under the Privatization Act. can be carried forward ten years, ef-
fective April 1. 1998.
Penalties: All persons (including companies) are required by
law to submit their tax returns, accompanied by the balance of tax
payable, to the Authority on or before September 30.82 Failure to com-
ply may result in statutory penalty charges. including fines and
imprisonment.
From the above discussion, one can see that a number of trad-
ers and entrepreneurs in the informal sector of the national economy
can avoid paying taxes such as the Mineral Royalty Tax. For the most
part, activities of such traders are unregulated. For example, there are
cases, such as the mining of precious stones (ex. emeralds) in Zambia's
Copperbelt Province, which have not brought much revenue to the
Government. Yet, precious stones such as emeralds fetch a high mar-
ket price internationally. Wherein, then, lies the problem? It is a well
known that some of the notorious West African precious stone dealers.
who operated at most of these emerald mines, had strong political con-
nections. A number of these individuals not only evaded the regulatory
structure governing the exploration and exploitation of mineral re-
sources. but they also evaded taxes relating to undertaking such
activities.
Thus, one of the weaknesses of the principles of Zambian tax
law is that the principles relate mainly to taxation of investors who
deal through the formal sector of the national economy and those that
transact across international borders. A counter-argument, however,
is that efforts by tax administrators to pursue patrons of the informal
sector could prove too costly. The benefits derived from collecting taxes
in the informal sector could actually be outweighed by the costs of
monitoring and policing persons and enforcing the law. But, that view
by itself is not wholly persuasive. Incentives can be created, within the
context of the legal and regulatory frameworks, to attract patrons of
the informal sector to own up and submit to the tax regime. To develop
such a culture, it would bode well to legislatively spell out stiff penal-
ties for tax evasion and provide incentives, such as periodic and inter-
mittent tax holidays to persons complying with the law. The legislative
efforts here should be supported by efficient and effective tax adminis-
tration and criminal justice systems.

2 Zambia Revenue Authority. Due Dates for Payment of Tax, at http'//zra.org.

zm/payments.htm (last visited Mar. 5, 2002).
58 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

In July 1995, the Zambian Government introduced a value ad-

ded tax (VAT), to serve as a replacement for sales tax. 3 The preamble
of the Value Added Tax Act of 1995 provides that the statute is an Act
to impose tax on the supply of goods and services in Zambia and the
importation of goods into Zambia. The preamble further adds that the
VAT statute repeals the Sales Tax Act (Cap 663) and the Insurance
Levies Act of 1990 and provides for matters connected with or inciden-
tal to the foregoing. In the words of ZRA:
[VAT] is a broad based, invoice driven and self-policing
tax. It eliminates the double taxation factor associated
with Sales Tax. VAT is a consumer expenditure tax lev-
ied on the supply of goods and services made in the
course and furtherance of business taking place in
Zambia.
Scope and Coverage: The current VAT standard rate is
17.5% and applies to most goods and a range of ser-
vices. s4 The main zero ratings and exemptions are in the
following areas: 5
Zero-rating Exemption
* basic foods • health and educational
services
* agricultural supplies 0 supply of water and
sewerage services
* exports of goods 0 books and newspapers
* foreign aid donations8 6 0 most public transport
services
* medical supplies and 0 sale of land and real
drugs estate
a financial services
According to ZRA:
The VAT system in Zambia was designed to be as
straightforward as possible with easy-to-understand def-
initions on e.g. the tax point and the tax value. s7 One

83 Value Added Tax Act of 1995, at http://www.unza.zm/acts/1995/value95.htm

(last visited Mar. 4 2002).
84 Zambia Revenue Authority, VAT-Leaflets & Booklets, The VAT Guide Leaflet

No. 1, at http://zra.org.zm/vat/pubs/ %20Guide.pdf (last visited Mar. 5, 2002).

85 Zambia Revenue Authority, VAT-Leaflets & Booklets, The VAT Liability Guide

Leaflet No. 2, at http://zra.org.zm/vat/pubs/Liabiliy%20Guide.pdf (last visited Mar.

5, 2002).
86 Zambia Revenue Authority, VAT-Leaflets & Booklets, Zero Rating of Goods
Purchased by Donor Agencies, at http://zra.org.zm/vat/pubs/Zero-Rating-of-Goods-
Purchased-By-Donor-Agencies%20Guide.pdf (last visited Mar. 5, 2002).
87 The VAT Guide Leaflet No. 1, supra note 95.
20051 FRAMEWORK FOR TAX LAW IN ZAMBIA

point to note, however, is that input tax cannot be re-

claimed on:
* business entertainment;
* motor cars:
* petrol; and
* telephone services.
In addition, input tax is also disallowed on non-business
expenditures, including staff housing, household furni-
ture, etc.
VAT Registration:A registration form (VAT-i) can be ob-
tained from the ZRA Advice Center or the nearest ZRA
offices. The registration prerequisites and procedures are
as follows:
Statutory Registration:Businesses are required by law to
register as VAT traders if they supply taxable goods or
services, and their taxable turnover exceeds one of the
mandated threshold requirements stated below:
(a) K30 million in any twelve consecutive months;
(b) K7.5 million in any three consecutive months; or
(c) Taxable turnover is expected to exceed either
amounts stated in (a) and (b) above in the subse-
quent twelve months or three months respectively. "
Voluntar, Registration: Voluntary registration was introduced to ac-
commodate traders whose taxable turnover did not meet the statutory
requirement. Once registered, the trader has the obligation to abide by
the same rules that apply to statutory registered traders. VAT has pro-
visions that have been put in place to assist traders. Voluntary regis-
tration is one of the options and other options are as follows: 9
Cash Accounting: A trader with a taxable turnover not
exceeding K200 million per annum and who provides in-
formation requested by the Commissioner can apply for
the cash accounting or payment basis. The annual taxa-
ble turnover limit for cash accounting has been raised to
K300 million, effective July 1, 1998. Payment basis re-
quires a trader to account for the VAT charged on their
sales on amounts actually received and claim VAT only
on purchases that have been paid.9"

88 Zambia Revenue Authority, VAT-Leaflets & Booklets, VAT RegistrationLeaflet

No. 8, at httpJ/zra.org.zm/vat/pubs/ VATc20Registration.pdf (last visited Mar. 5,
2002); Zambia Revenue Authority, VAT-Leaflets & Booklets, The VAT Options
Leaflet No. 9, at httpJ/zra.org.zmlvat/pubs/ The9q20,AT'7c20Options.pdf (last vis-
ited Mar. 5, 2002).
89 id.

90 The VAT Options Leaflet No. 9, supra note 99.

60 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

Longer Tax Period: The standard tax period commences

by the first day and ends the last day of each calendar
month. Traders are expected to submit their returns by
the twenty-first day of the following month. Provided
they satisfy certain conditions, traders have been given
the option to apply for accounting periods extending up
to three months. Effective July 1, 1998, the maximum
annual taxable turnover limit to qualify for the three
month tax period has been raised from K100 million to
K200 million in order to assist small scale businesses.
Such businesses can now elect to submit only four re-
turns per year instead of twelve.9 1
Import VAT Deferment Scheme: An Import VAT Defer-
ment Scheme is available to registered tax compliant
businesses. This facility permits allowable goods to be
imported effectively "VAT free" and avoids the cash flow
burden of paying the tax at importation and waiting a
month or so before it can be reclaimed. 2 If the import
VAT deferment facility is sought, then a separate appli-
cation should be made after VAT registration to the ZRA
Advice Centre. The application should give details and
estimated values of the goods intended to be imported by
this facility. An approval number will be allocated to the
successful applicant. The approval is restricted to capital
goods, but does not include:
* motor vehicles (saloon cars, twin cabs, and station-
wagons);
* domestic and household items and electrical appli-
ances (TVs, refrigerators, furniture); and
" items of personal nature (musical instruments,
watches, etc.).
The trader should specify the type and quantity of goods
intending to be imported and certify in a letter that the
goods imported will be used for producing taxable goods
and services.
Tour Package: To promote the tourism industry, a zero
rated tour package for tourists has been introduced. A
tour package is "[slupplied by a tour operator or travel
agent, licensed as such by the Zambia National Tourist
Board, to a tourist who is not resident of Zambia, subject

91 Id.
92 Zambia Revenue Authority, VAT-Leaflets & Booklets, Import Deferment
Scheme Leaflet No. 19, at http://zra.org.zm/vat/pubs/ Import-VAT-Deferment-
Scheme%20.pdf (last visited Mar. 5, 2002).
20051 FRAMEWORK FOR TAX LAW IN ZAMBIA

to such conditions as the Commissioner General may by

rule require.- To qualify as a tour package, the tourists
have to make bookings before arriving in Zambia, and
the package should include accommodation and other
tour services (ex. game drive, canoeing, rafting, etc.) for a
period of at least twenty-four hours.9 3
Refund Scheme for Tourists: The Tourist Refund Scheme
is another incentive for tourists to visit Zambia. The pur-
pose of this Scheme is to permit tourists to claim VAT
paid on goods purchased from retailers approved to oper-
ate the scheme. VAT will be paid as usual on all
purchases. A participating retailer issues an export tax
invoice (VAT 263) to the tourist when purchasing goods.
The VAT 263 is used to claim back VAT paid on
purchases when the tourist is leaving Zambia. There are
three designated points of exit where this scheme
operates:
* Lusaka International Airport
* Ndola International Airport
* Victoria Falls Border Post
The officers at the exit point will certify and stamp the
export tax invoice and ensure that the goods purchased
are intended for export purposes. The tourists will not
receive their refund at the point of exit, but rather have
their refunds sent to their destination address within a
period of eight weeks. 94
Commercial Exporters VAT Refund Scheme: "In addition
to the existing VAT zero-rating, a new scheme permitting
commercial exporters to obtain a refund of VAT paid on
goods purchased from registered suppliers has been
introduced.'
Only foreign passport holders on a business visit to Zambia are
allowed to use the scheme. An important point to note, however, is
that the scheme applies only to commercial export consignments that
do not qualify for the zero-rating currently in operation.

9 Zambia Revenue Authority, VAT-Leaflets & Booklets, VAT Zero Rating For
Package Tours Leaflet No. 11, at http//zra.org.zm/vatpubsA'AT%20Ref-und%20
For-20Foreign% 20Tourists.pdf (last visited Mar. 5. 2002).
' Zambia Revenue Authority, VAT-Leaflets & Booklets, VAT Refund Scheme For
Goods Purchased by Foreign Tourists Leaflet No. 5, at httpJ/zra.org.zm/vat/pubs/
VAT/ 20Refund% 2oScheme%20Forc20Foreign%20Tourists.pdf (last visited Mar.
5, 2002).
95 Zambia Revenue Authority, VAT-Leaflets & Booklets, Refunds for Commercial
Exporters Leaflet No. 23, at httpJ/zra.org.zm/vat/pubs/Refunds20For-20
Commercial%20ExPorters.Pdf (last visited Mar. 5, 2002,.
62 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

VAT Returns: VAT returns usually cover one calendar month (al-
though smaller businesses can opt for three monthly tax periods).
These returns must be submitted no later than the twenty-first day of
the following month (i.e. the return for the month of January is due by
February 21). Full details of these and other features of the tax period
can be found in the VAT General Guide (VAT Leaflet No. 1) which can
be obtained at the ZRA Advice Centre or your nearest ZRA Office. 6
Tax Compliance: A high standard of VAT tax compliance is demanded
in Zambia. Automatic penalties are prescribed by law for late VAT re-
turns. These are the greater of K180,000 or 0.5% of the tax due per
day. The penalties imposed for false returns and evasion include heavy
fines and, in serious cases, imprisonment. The tax compliant trader
can however, expect a friendly and efficient service from the four VAT
Offices at Lusaka, Ndola, Kitwe, and Livingstone, and from the ZRA
Advice Centre.9 7 Like taxes discussed earlier, it is difficult to appreci-
ate how VAT can apply to an informal sector trader who is busy ped-
dling his merchandise along the streets of Lusaka. It is in such areas
of the law that the Government should move to redress these seem-
ingly persistent lacunas.
The Customs and Excise Division of ZRA, handles the collec-
tion of customs duty, import VAT, excise duty, surtax, and Import Dec-
laration Fee (until July 1, 1998). This department administers: (a) the
collection and management duties, including customs and excise du-
ties, (b) the licensing and control of warehouses and premises for the
manufacturing of certain goods, (c) the regulation and control of im-
ports and exports, (d) the facilitation of trade, travel, and the move-
ment of goods, and (e) the providing of statistical data to the Zambian
Government on imports and exports.9 8 As ZRA notes:
Importation of Goods: It is a legal requirement that all
goods imported be fully declared at the point of entry.
Liability for the payment of customs duties and Import
VAT arises at the point of importation; but, at the discre-
tion of a Station Manager, certain consignments may be
removed under bond to an inland Custom House where
final clearance can be done. All imported goods must be
cleared, and the relevant duties must be paid within
thirty days after importation. A Bill of Entry, together
with supporting documents, has to be submitted by the
importer or agent in order to affect Customs clearance.

96 The VAT Guide Leaflet No. 1, supra note 95.

97 Id.

98 Zambia Revenue Authority, Customs and Excise, Functions, at http://zra.org.

zm/customs/pubs/ Leaflet41420-%20Excise.pdf (last visited Mar. 5, 2002).
20051 FRAMEIWORK FOR TAX LA W IN ZAMBIA

Restrictions and Prohibitions: Stills and similar appara-

tus capable of being used for the production or refining of
alcohol may be imported only with written permission
from the Commissioner General. as The following are to-
tally prohibited from importation:
* base or counterfeit coins,
* any goods which are indecent, obscene, or
objectionable,
" any goods which may tend to deprave the morals of
any inhabitants of Zambia,
* prison-made and penitentiary-made goods,
* qilika,
* spirituous beverages which contain preparations, ex-
tracts, essences, or chemical products which are nox-
ious or injurious, and
" any goods that are prohibited from importation under
the authority of any law.1 °
Special permits are required for the importation of fire-
arms, live plants, and animals. These permits are issued
by the Ministry of Home Affairs and the Ministry of Agri-
culture, Food, and Fisheries respectively.
Customs Valuation System: Zambia is currently apply-
ing the Brussels Definition of Value (BDV) as a basis for
determining the customs value of imported goods."'
BDV defines a customs value as the price obtainable in
the open market when offered to a buyer by a seller inde-
pendent of each other. This price must be freely availa-
ble. Zambia intends to introduce the World Trade
Organization (WTO) (formerly GAT) valuation system
by the year 2000. The implementation strategy is being
worked out by an appointed Customs Steering Commit-
tee. Currently, Zambia is employing a Pre-Shipment In-
spection (PSI) program. All goods with Freight on Board
value above US $2,000.00 are subjected to PSI in the
country of supply, except those goods that are exempted
by Government.

99 Zambia Revenue Authority, Customs and Excise - Publications, Excise - A Brief

Guide Leaflet No. 4, at httpJ/zra.org.zm/customs/pubs/ Leaflet4%20-kc 20Excise.
pdf (last visited Mar. 5, 2002).
o'The VAT Guide Leaflet No. 1, supra note 95.
101 World Trade Organization, Trade Policy Reviews: Zambia: August 1996, at
http-//www.wto.org/english/traptop-e/tpr-e/tp37e.htm (last visited Mar. 5, 2002).
64 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

ZRA explains the administration of Customs Duty, Import

Value Added Tax, Excise Duty, Surtax, Import Declaration Fee, and
many other related taxes in the following manner:
Customs Duty: Following the initiative set by the Gen-
eral Agreement on Tariffs and Trade (GATT), Zambia
has consistently followed a policy of reducing tariff levels
since 1991.1"2 For example, significant rate reductions
were made in 1996. The current customs duty rates
range between 0% and 25%, with 15% as the most com-
mon rate. In general, the 5% rate covers raw materials,
the 15% rate applies to intermediate goods, and the 25%
rate covers finished products. 10 3 In addition there is a
limited list of "merit" goods which are duty free. Merit
goods include, among other items, books, fertilizers, and
primary forms of rubber and steel.1 °4 Imports originat-
ing from COMESA countries enjoy a 60% reduction be-
low the normal prevailing rates, with the object of
encouraging trade between Common Market for Eastern 105
and Southern Africa (COMESA) member countries.
Import VAT: Import VAT is charged on imported goods at
the point of importation. Import VAT rates are the same
as those applicable to Domestic VAT. The standard rate
is 17.5% of the Taxable Value (i.e. sum of Value for Duty
Purposes and Customs Duty).
Excise Duty: Excise duty is charged on such goods as:
alcoholic products, soft drinks, tobacco products, hydro-
carbon oils, and tires (both imported and domestically
manufactured). The current Excise Duty rates range
from 10% for tires and tubes to 125% for wines and spir-
its. Duty rates for common products are listed in Excise -
A Brief Guide (Leaflet No. 4).106
Surtax: Surtax is a duty levied on opaque beer, in addi-
tion to imposed Excise Duty and VAT. The current rate is
15% ad valorem.
Import Declaration Fee (IDF): The payment of the Im-
port Declaration Fee is done at the importer's commer-

102 Id.
103 Zambia Revenue Authority, Customs and Excise, Taxes Administered, at http:/
/zra.org.zm (last visited Mar. 5, 2002).
104 Industry Canada, Zambia Country Commercial Guide 2004, http://strategies.

ic.ca/epic/internet/inimr-ri.nsf/en/grl2004O5e.html (last visited Mar. 5, 2002).

105 Zambia Revenue Authority, Customs and Excise - Publications, Common Mar-

ket for Eastern and South Africa (COMESA) Leaflet No. 10, at http://zra.org.zm-
customs/pubs/ Leaflet10%20-%20COMESA.pdf (last visited Mar. 5, 2002).
106 A Brief Guide Leaflet No.4, supra note 111.
20051 FRAMEWORK FOR TAXY LAW IN ZAMBIA

cial bank when goods are ordered. The current rate of

IDF is 5% on Cost, Insurance, and Freight (CIF). IDF is
charged on imported goods whose value exceeds US
$500. If not paid through the bank, the rate is 10% paya-
ble directly to Customs. This includes 51 actual IDF fee
and 5% penalty. The IDF was discontinued July 1, 1998.
Exportation of Goods: Before exportation, exporters are
required to complete a Customs Form No. CE20 showing
the nature, value, and quantity of the goods to be ex-
ported."0 7 Exports by post are covered by a declaration
made by the exporter on Customs Form No. CE13. If the
exportation is of a commercial nature, this declaration
should be supplementary to the CE20 Form. Articles
meant for temporary export, which are to be returned to
Zambia, should be registered on Customs Form No.
E200, E201, or E202 before removal. Certain goods are
subject to export control, including agricultural produce
and some metals.
Bonded Warehouses: Customs and Excise allows the
warehousing in bond of most goods. Thus, most major
10 8
commercial centers have bonded warehouses.
Refunds, Remissions or Rebates of Duty: Any person entering Zambia
must report to an officer of Customs and Excise and make a declara-
tion of goods. Depending on the fulfillment of certain conditions at-
tached to the prevailing rebate regulations, collection of customs
duties or excise duty may be foregone. Wherever duty is rebated it is a
general condition that the subject goods are not sold or disposed of
without the consent of the Commissioner General. The following clas-
ses are details of specific rebates in force.
Diplomats: Diplomatic personnel are exempt from pay-
ing customs duties and excise duty if they are accredited
by Zambia and enjoy full immunities and privileges as
provided by the Diplomatic Immunities and Privileges
Act and Orders made under the Act.
Tourists: Bonafide tourists are entitled to a rebate of
duty on all goods (including a motor vehicle) temporarily
imported into the country for their own use. However,

107 Zambia Revenue Authority, Customs and Excise - Publications, Excise - Ex-
portation of Goods Leaflet No.12, at httpJ/zra.org.zm/customs/pubs/ Leaflet12%20-
%20Exportation'(20ofl20Goods.pdf (last visited Mar. 5, 2002).
10 Zambia Revenue Authority, Customs and Excise - Publications, Bonded Ware-

houses Leaflet No. 3, at http=I/zra.org.zm/customs/pubs/Leaflet3%20-20Bonded%

20Warehouses.pdf (last visited Mar. 5. 2002).
66 RICHMOND JOURNAL OF GLOBAL LAW & BUSINESS [Vol. 5:1

such goods must be exported within twelve months after

their importation or full payment of duty becomes due.
New Residents (new arrivalsand persons who have been
residing outside Zambia for less than five years): Persons
arriving in or returning to Zambia to take up or resume
employment or residence are entitled to a rebate of duty
on their household and personal effects (excluding motor
vehicles). The rebate is subject to the following
conditions:
* the person must have been a resident outside Zambia
for at least five years before arrival in or return to
Zambia,
* the effects must have been the property of the person
before the date of departure for Zambia from the pre-
vious country of residence,
* such goods must be imported at the time of the per-
son's arrival in Zambia or, if there is an unreasonable
delay, that delay must have been due to circum-
stances beyond the control of the new resident, and
* the new resident must provide information or docu-
mentation showing the date of arrival in Zambia and
dates of residence outside Zambia.
Travelers' Effects: A duty rebate is allowed with respect
to reasonable quantities of used goods imported in the
baggage or upon the person of a traveler and intended for
his or her own use. There is also a concession for reason-
able quantities of consumable articles, including:10 9
0 beer 2.5 liters,
* wine 2.5 liters,
* spirits 1.5 liters, and
* 400 cigarettes or 0.5 kilograms of cigars or pipe
tobacco.
The allowances on alcohol and tobacco are not granted to persons
under the age of eighteen years.11 0 In addition to the above conces-
sions, a duty rebate may be granted on goods not exceeding US $150 in
value for each traveler (excluding merchandise and the goods referred
to above), imported in accompanied baggage or upon the person of the
traveler.
Generally speaking, although most of the tax law principles ap-
pear well developed in Zambia, the Zambian Government and ZRA

109Zambia Revenue Authority, Customs and Excise - Publications, Passenger

Clearance - A Brief Guide to Travelers Leaflet No. 1, at http'//zra.org.zm/customs/
pubs/Leafletl%20-%2OPassenger%20Clearnace.pdf (last visited Mar. 5, 2002).
110 Id.
2005] FRA4IMEIVORK FOR TAX LAW IN ZAMBIA

need to develop an efficient and effective regulatory framework to cap-

ture the taxation of earnings and profits in the informal sector of the
national economy as well. The Zambian informal sector has existed as
an unregulated enclave of the national economy for some time. The
lack of regulatory capture in this segment of the economy has resulted
in the Zambian Government losing out on huge potential revenues.

3.0 CONCLUSION

This paper has examined the efficacy of the institutional and

regulatory framework for the administration of tax law in Zambia,
showing how tax law relates to the conduct of business and commerce
in that countrv. The main principles of tax law were fleshed out and
the institutional framework for the administration of tax law in
Zambia was examined. The paper focused primarily on examining the
institutional framework for tax law administration and analysed the
main principles of tax law. An evaluation of the efficacy of the institu-
tional framework for the administration of tax law was made, and ar-
eas of vulnerability in the institutional and regulatory frameworks,
such as the power of the Republican President to appoint and dismiss
the Commissioner-General at will, were highlighted.
Although the regulatory and institutional frameworks appear
generally sound, there are many areas of vulnerability which could af-
fect the efficiency and effectiveness of ZRA's performance. The Zam-
bian Government should take pro-active measures to introduce
amendments redressing flaws in the statutory provisions of the
Zambia Revenue Authority Act 1993, addressing disclosure of inter-
ests matters, the excessive discretionary powers of the Minister of Fi-
nance to issue directives, and the definition of phrases such as
"necessary modification" and "as soon as practicable."
An argument was also made that the Zambian Government
needs to develop an efficient and effective regulatory framework that
captures taxation on earnings and profits in the informal sector of the
national economy.