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Comment: Government must look to informal sector for revenue

Filed under: Business,Special Comments |
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By: Chipindi Caleb Fundanga

Zambia Revenue Authority as our chief revenue collector should start being more innovative in their revenue collecting schemes. The question of whether our economy is growing is no longer up for debate. Its goes without saying we have grown as an economy but government is still battling with finding prudent methods to “milk” this cow, this has led to draconian measures like fuel hikes and electricity hikes. The Zambian economy is a free market economy whose biggest players are in the informal sector and participating in the growing trend of small medium enterprise. A close look at just our capital Lusaka, you get a view of thousands of marketeers, street vendors and craftsmen that go untaxed. Revenue collection for these rather informal businesses is delicate and rather sensitive but tactics can be put in place to ensure government benefits in some form from these individuals.

Assessing the profitability and returns of these businesses is virtually impossible as some of them fall under seasonal and without adequate accounting leads to a melay of problems. These problems can easily be avoided by categorizing these traders and craftsmen. Depending on location and product or service offered  a fixed levy can be set.

In an ideal situation if every marketeer is paying K10 minimum quarterly which comes to just over $1 USD in a country that has an estimated 3 million plus marketeers and street vendors Zambia Revenue Authority would be looking at around 3 million USD from this catrgory quarterly. One would immediately suggest that putting this into effect and running such a program would be complicated and difficult to monitor but with the help and co-operation of the city councils creating a database and an identification system this goal can some what be reached, even with a 75% success rate government would still look at gaining $2 million USD plus quarterly.

A look at craftsmen these individuals include carpenters, welders, painters and brick layers this category holds around 200,000 plus non tax paying individuals who can be categorized differently paying even upto K20 or $2 USD quarterly.

The concept behind the message trying to be put across is simple, if effectively managed and monitored the informal sector can begin to throwback into a pool of revenue it has previously avoided. The much needed revenue collection schemes must start being the topic of discussion. Government is in need of revenue and the players at the top should start looking at innovative methods of getting the population involved rather than quick fix schemes like attaching TPIN numbers to bank accounts.

 

Chipindi Caleb Fundanga

Investment Consultant

Institute of Finance and Economics (Zambia)

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