university zambia (cuz) requirement’s for the award of
TRANSCRIPT
i
An investigation into the performance of agriculture taxation administered by the
Zambia Revenue Authority
A dissertation submitted in partial fulfilment of the by the Cavendish
University Zambia (CUZ) requirement’s for the award of Undergraduate
Bachelor of Accountancy (BAC)
Student ID: 004-474
Module Code: BAC 421
Supervisor: MR. DENNIS LUBUMBE
Word count: 9 494
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May 2020
Abstract
This study aimed to investigate into the actual performance of all tax types that specifically relate
to agriculture taxation administered by the Zambia Revenue Authority. To measure this, the
study utilized a qualitative approach through interviewing eight selected officials coming from
all the relevant tax type of the Zambia Revenue Authority (ZRA) operating divisions. The
interviews conducted and structured using my made topic guide and readily available tax
information from the Zambia Revenue Authority information platforms. The findings show that
farming has the lowest tax rates and obligation. It was further established that taxpayers could
reduce their tax obligation provided for by the law. The findings show a lack of information on
tax issue on the part of the beneficiaries the farmers. The finding further shows a gross lack of
tax compliance among the farmers which need further research to establish why this is so.
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Statement of Authenticity
I, Kennedy Makonde, do hereby, solemnly declare, that this research report is my own work.
And that all the works of other persons has been duly acknowledged, and that this work has not
been previously been submitted for a degree at this university or at any other University for
similar purposes.
Signed: ...................................................... Date: .............................................................
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Acknowledgements
First, and foremost, I would like to thanks my Lord Jesus Christ for the grace given to me to
reach this far. I would like to further, extend my sincere thanks and obligation towards all the
persons who have helped me in this endeavor, without their active guidance, help, cooperation
and encouragement; I would not have made break through with the project.
I am extremely thankful and pay my gratitude to ZRA officials’ valuable cooperation and
support for completion of this project. I also acknowledge with sincerity, my gratitude towards
my wife, who has always supported me morally. At finally yet importantly gratitude goes to all
of my friends who directly or indirectly helped me to complete this project report. Any omission
in this brief acknowledgement does not mean lack of gratitude.
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Table of Contents Abstract ........................................................................................................................................... ii
Statement of Authenticity .............................................................................................................. iii
Acknowledgements ........................................................................................................................ iv
List of tables .................................................................................................................................. vii
CHAPTER ONE .................................................................................................................. - 1 -
1.0 Introduction ........................................................................................................................... - 1 -
1.2 Background ........................................................................................................................... - 1 -
1.2 The Problem Statement ......................................................................................................... - 2 -
1.3 Research Objectives .............................................................................................................. - 3 -
CHAPTER TWO ................................................................................................................. - 5 -
2.0 Literature Review.................................................................................................................. - 5 -
2.1 Taxes that impact on Agriculture as a business .................................................................... - 6 -
2.1.1 Direct taxes ..................................................................................................................... - 6 -
2.1.2 Indirect Taxes................................................................................................................... - 15 -
2.1.3 Customs and Excise ......................................................................................................... - 19 -
2.2 Taxes incentives that impact on Agriculture as a Business ................................................ - 20 -
CHAPTER THREE ........................................................................................................... - 22 -
3.0 Research Methodology ....................................................................................................... - 22 -
3.1 Objective ............................................................................................................................. - 22 -
3.2 Research Question .............................................................................................................. - 23 -
3.3 The Research Design .......................................................................................................... - 24 -
3.3.1 Research Strategies ...................................................................................................... - 24 -
3.4.1 Primary Information ..................................................................................................... - 25 -
3.4.2 Secondary Information ................................................................................................. - 25 -
3.5 Data Analyzing Procedure .................................................................................................. - 27 -
4.0 Findings and Results ........................................................................................................... - 30 -
4.1.1 Direct taxation .............................................................................................................. - 30 -
4.1.2 Withholding Tax (WHT) .............................................................................................. - 31 -
CHAPTER FIVE ............................................................................................................... - 38 -
5.0 Discussion and Recommendations ..................................................................................... - 38 -
5.1 Discussion ...................................................................................................................... - 38 -
5.1.1 Direct taxation .............................................................................................................. - 38 -
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5.1.2 Indirect Taxation .......................................................................................................... - 41 -
5.1.3 Customs and Excise taxation ....................................................................................... - 41 -
CHAPTER SIX.................................................................................................................. - 43 -
5.1 Recommendations ............................................................................................................... - 43 -
6.0 Conclusion .......................................................................................................................... - 44 -
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List of tables
Table 2. 1: Source: Adapted from ZRA (2020) .......................................................................... - 8 -
Table 2. 2: Source: Adapted from ZRA (2020) ........................................................................ - 12 -
Table 4. 1: Table 2. 3: Withholding tax rate. Source: Adopted from ZRA (2020) - 34 -
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CHAPTER ONE
1.0 Introduction This chapter gives a background to the study as it relates to the taxation with regard to the
agricultural sector. It outlines the statement of the problem, research aim and research objectives.
1.2 Background The development of Zambia primarily depends on the amount of revenue generated by the
government for the provision of goods and services. One major source of generating this revenue
is taxation by its agent Zambia Revenue Authority.
Currently there is a greater call from all stakeholders for the government to broaden the tax base.
There is a general feeling that other sector of the economy like the agriculture sector are not
contributing their fair share of taxes which is commensurate with their tax potential.
The Zambia Revenue Authority the taxation agent of the government has employed a number of
measures to address the above matter. The measures employed by the Zambia Revenue
Authority includes the following among others:
1. Providing for tax incentives towards agriculture sector as provided for by the Law
2. Imposing taxes on the agriculture sector as provided for by the Law
3. Providing tax payer education to enhance compliance
4. Employing a graduating tax rate systems to increase the tax net
5. Subcontracting on a commission base tax collection
6. Punitive and graduating penalty system to enhance compliance and deter tax evasion
7. Employing self-assessment system
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The current government tax policy towards the agriculture sector primarily advances both the
taxation reach and providing for tax incentives to increase production. This research is needed to
bring together under one umbrella all the taxes and tax incentives, which apply to the agriculture
sector as a business as provided for by the Law. Furthermore, the need to clarify and make easily
understandable the financial tax impact to the agriculture operatives as a means to enhance
compliance. It is, generally accepted that taxpayer education leads to tax compliance, which in
turn leads to broadening of the tax base.
1.2 The Problem Statement The importance of taxpayer education as long been recognized as a primary pre-requisite for
broadening the tax base, tax compliance enhancer, and furthermore it improves investor
confidence in the agriculture sector.
Furthermore, with the Zambia Revenue Authority now moving to self-assessment systems and
requirements, which have come with punitive and graduating penalty system for non-compliance
making tax awareness a must for the agriculture operatives. The tax authority is even empowered
to apply tax assessments as far back as five years on non-compliance with penalties and interest.
Despite the taxpayer education efforts by the Zambia Revenue Authority, there is still a serious
lack of tax information especially among the agriculture operatives. Tax consultants also are
mainly conversant with tax matter that relate mainly to specific industries like trading, mining
and manufacturing. They seem lost when it comes to tax matters applying to the agriculture
sector, taxation of the agriculture sector and its treatment in the books of accounts seems to be a
challenge to most practicing accountants. Moreover, for most farmers and potential investors in
the agriculture sector find themselves in a tax uncertainty situation.
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In summary, there is a need for a better understanding and awareness of all taxes and tax
incentives applying to the agriculture sector. This will ensure tax compliance by agriculture
operatives under the current tax self-assessment age.
Most specifically, the following research questions needs addressed:
1. What are the tax type that the farm business is obligated to comply with under the current
taxation regime?
2. How do these relevant tax types financially affect the books of account of the farmer?
3. What are the tax incentives available for the farmer under all the Zambia Revenue
Authority operating divisions (Customs Services, Direct Tax Services and Indirect Tax
Services)?
4. How do these relevant tax incentives financially affect the books of accounts of the
farmer?
5. Answering the above four research questions will provide the answer to “on whether its
possible to consolidate all the tax types and tax incentives affecting the farming as a
business under one umbrella document (limited to taxes administered by the Zambia
Revenue Authority?”
1.3 Research Objectives The long-term goal of the research is to develop an umbrella agriculture taxation-working
document to enhance taxpayer education. The objective of the current study is to provide a
comprehensive review of literature, and Zambia Revenue Authority taxation practices covering
the agriculture sector. Particularly, the study has the following sub-objectives:
1. To provide a comprehensive list of all the direct and indirect taxes that apply to the
agriculture sector
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2. To provide a comprehensive list of all the direct and indirect tax incentives that apply to
the agriculture sector
3. To provide a comprehensive working computation guidance on accounting for taxes in
the agriculture sector
4. To provide a comprehensive analysis method for analyzing and appreciating the taxation
impact on financial performance of the agriculture operatives
The results of this study will be valuable to the agriculture industry practitioners, tax consultants
and investors. Furthermore, it will enhance tax awareness among the farmers, as well as enhance
the broadening tax base agenda. In short, tax compliance will be enhanced
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CHAPTER TWO
2.0 Literature Review The agriculture sector is both key and priority sector in the Zambian economic development. The
government through Zambia Revenue Authority has been providing several incentives to
stimulate the development of the sector, and at the same time imposing some taxes that may
counteract the positive effects of these incentives. The Taxation of agriculture income receives
preferential treatment compared to other sectors of the economy such as manufacturing and
mining. The standard corporate income tax rate is 35% (manufacturing, mining etc.). However,
income from agricultural income currently taxed at 10% (ZRA, 2020). This employed measure
works to stimulating agricultural production and encouraging value addition (IAPRI, 2017).
A preliminary literature review shows that there is actually no comprehensive past studies, on the
effects of taxation on agriculture as a business. The only available past studies mainly due with
taxation of the agriculture sector from an economics perspective and not from a business
perspective.
However, available past studies have primality only dealt with specific taxes issue that have
being imposed and specific tax incentive given to the agriculture sector with a view of explaining
their impact on the agriculture sector. However, what is missing from past studies among others
is as follows:
1. A comprehensive list of all the direct and indirect taxes that impact agriculture operatives
2. A comprehensive list of all tax incentives that benefits agriculture operatives
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3. A comprehensive analysis of the financial impact imposed by all the established and
relevant taxes and tax incentives on agriculture operatives
In short, no past studies have managed to bring out all the taxes and tax incentives relating to
agriculture as a business under one roof. My proposed research will try to fill this study gap
highlighted above. A comprehensive evaluation of all applicable taxes and tax incentives on
agriculture from an accounting perspective will be undertaken.
2.1 Taxes that impact on Agriculture as a business
2.1.1 Direct taxes
The legislative framework relating to the regulations and administration of the taxation, which
has provided for in the Income Tax Act 1966, as amended. The source of income and residence
are the basis for liability to tax under the Zambian tax regime.
The Income Tax Act requires every person (embracing every agriculture business entity, farming
enterprise or farmers) receiving income liable to tax under the Act to notify the Zambia Revenue
Authority, in writing, accordingly within thirty (30) days from the date of first receiving such
income. They will be registered and given a Taxpayer Identification Number (TPIN), Individual
or Company Income Tax account number where applicable. A new taxpayer will be required to
register as stated above. They need to use their estimated turnover on the registration. It will be
necessary to register for all eligible tax types at initial registration. Furthermore, the Act also
provides for penalties for failure to give the necessary notice (ZRA, 2020). The principal taxes
affecting agriculture include direct taxes (notably corporate tax, turnover tax, Withholding tax,
and property transfer tax), Customs and Excise duties, Value Added Tax (VAT).
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Company/Corporate Tax
The Income tax Act (Chapter 323 of the Laws of Zambia) is the legislation that governs the
taxation of Income in Zambia. Income tax is tax on profit made by agriculture operatives
registered under Limited Companies and self-employed individuals (farmers). All profit making
persons have an obligation to pay Income tax on their profits. The Zambia Revenue Authority
levies corporate tax from the agriculture sector at 10% (ZRA, 2020).
Section 2 of the income tax Act defines assessable income as the amount of a person’s income
liable to tax which may be included in an assessment and which remains after allowing the
deductions, to which that person is entitled under the provisions of the Act Cap 323. The
assessable income returned in annual income tax return in accordance with section 46(1-3) of the
Income tax Act (ZRA, 2020).
The provisions of the Act Cap 323 dealing with returns (in particular sections 46 and 47) do not
apply to taxpayers covered by section 64A (2). Section 64A (2) excludes from Income tax
persons (agriculture operatives/farmers) with turnover of K800 000 and below. In simple terms
Company tax applies on agriculture operators whose turnover is above K800 000 per annum
(Farming is at 10%).
In Zambia, all agriculture business companies whether they are resident or non-resident and are
in receipt of income, which has a source or deemed source in Zambia are liable to tax (PKF
Worldwide Tax Guide 2016/2017).
The company taxpayer is required to keep proper books and accounts of all transactions, and
these “shall be retained for a minimum period of six years with an exception of transfer pricing
which is required to maintain records up to 10 years”. All information provided must be true and
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correct (ZRA, 2020). Any qualifying person/agriculture operator guilty of an offence under
section 98 of the Income Tax Act is liable on conviction to a fine not exceeding ten thousand
penalty units (K3 000) or imprisonment for a term not exceeding twelve months, or to both.
Income tax is due when a farmer/person is in receipt of income. Persons/farmer should prepare
annual accounts in which they will report their activities, to arrive at the profits upon which the
tax rate applicable will be applied for personal income tax and corporate income tax accordingly.
Below are comparative figure of corporative tax rate of key economic sector of in Zambia:
Corporate Tax Rates 2020
Standard rate 35%
Farming 10%
Agro processing sub-sector 10%
Export of non-traditional products 15%
Trading, Manufacturing and any other 35%
Banks 35%
Telecommunication companies 35% - 40%
Profit earned from mining operation (for base metals and industrial) 30%
New listings on LUSE by farmers 2%
New listings on LUSE by farmers > 33% shares taken up by
Zambians 5%
Listing by farmer on the LUSE > 33% shares taken up by Zambians 5% Table 2. 1: Source: Adapted from ZRA (2020)
Taxation of Partnerships
In Zambia, farmers operating under partnership registration will not be recognized as a distinct
taxable entity. The taxable income for the partnership, will be computed jointly, and then shared
between the partners according to the agreed ratio, and each partner is subject to tax on his share
of profits as farming income. For the reason it is not chargeable to tax instead, each partner will
be assessed separately (ZRA, 2020).
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Taxation of Co operative
The taxation matters of cooperatives is covered under part III of the second schedule of the
Income Tax Act, Cap 323 of the Laws of Zambia. There is a general misunderstanding on
cooperatives that they are exempted from income tax (company tax and turnover tax). However,
that is not the case because there is a limit to which income of a cooperative can be treated as
exempt from being taxed.
Part III of the second schedule of the Income Tax Act, provides for the following:
1. That the income of a cooperative registered under the cooperatives Act, shall be exempt
from tax;
2. If the gross income before deduction of any expenditure of such cooperative society
when divided by the number of its members on the last day of any accounting period of
twelve months does not exceed the amount taxable at the rate of zero percent per annum
for individuals (ZRA,2020)
Therefore, the income of farmers operating as a cooperative society registered under the
cooperative societies Act (Cap 397) is only exempt from tax on gross income before deduction
of any expenditure of such cooperative society, then dividing the balance by the number of its
members. The net balance should not exceed the pay as you earn (PAYE) exempt threshold
which is currently (2020) at K36 000 (for the charge year 2020).
Furthermore, note that the cooperative has to use the allowable limits of the exempt threshold for
individuals in the relevant charge year when determining whether it should be exempted from
income tax. In addition, in terms of registration all farmers operating has cooperatives are
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required to register for Tax Identification Number (TPIN) with Zambia Revenue Authority. The
farmer needs to ensure that the cooperative is registered for all eligible tax types as follows:
They will need to register for an appropriate income tax account (Corporate tax or Turnover tax)
Should the cooperative be renting out property then it should also register for withholding tax on
rent)
Turnover Tax
Any person carrying on business (farming) with an annual turnover or income of K800 000 or
less is liable to pay turnover tax. The ninth schedule to the principle Act amended by the deletion
of Part I and the substitution stipulate the rate of turnover tax.
The following is an extract:
Turnover per annum Tax Rate
K800 000 or below 4%
The applicable tax rate is 4% of gross sales/turnover. Further, note that when determining the tax
payable for the period the K3 000 per month exemption will no longer be applicable. The
turnover tax on business apply for both operating has a limited company, cooperatives and on
individual base as a farmer (ZRA, 2020).
Withholding Tax
Withholding tax is a not actually a tax as per say but a means of collecting that tax. Withholding
tax is deductible from a payment by the person who is liable to make payment at the point in
time the person to whom it is due to be made becomes legally entitled to it. The tenant is
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required to pay the tax deductible to the Zambia Revenue Authority by reference to the date of
accrual no matter how, when or who payment is made (ZRA, 2020).
Withholding tax is tax-collected source from some payments like rent, management and
consultancy fees, commissions, royalties and foreign contractors’ payments. The withholding tax
rate currently (2020) applicable for residents is 15 percent in all instances except for rent, which
is at 10 percent. The withholding tax rate on royalties, commission, management and
consultancy fees, and foreign contractors applicable to non-residents is 20 percent (ZRA, 2020).
Withholding tax that my impact on agriculture as a business
Category Impact status Charge year 2020
Rentals (Final tax) Direct 10%
Non-resident contractors Indirect 20%
Commissions to non-residents Indirect 20%
Commissions to residents Indirect 15%
Royalties to non-residents Indirect 20%
Royalties to residents Indirect 15%
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Management and Consultancy fees to residents Indirect 15%
Management and Consultancy fees to non-residents Indirect 20%
Table 2. 2: Source: Adapted from ZRA (2020)
Withholding Tax – Rentals
This affect rented out farmhouses, farm warehouses, farmland, etc. The farmer must ensure the
tenant remit the withheld monies. It is important to note that the property from whose rentals the
withholding tax is deducted must be situated in Zambia. The payer (tenant) is responsible for
deducting withholding tax from gross rentals on the date of accrual of any amount due to the
payee (farmer). The tenant should remit the amount so deducted to the Zambia Revenue
Authority. This is the final tax at the end of the year; the farmer will be required to submit an
annual income tax return containing all sources of farming income including rental income
(ZRA, 2020).
Withholding Tax – Management and Consultancy fees
Management and consultancy fees means “payment in any form, other than an emolument, for or
in respect of any administrative, consultative, managerial, technical or any services of a like
nature or any creation, design, development, installation and maintenance of any information
technology solution, program, system or a combination”. These cover management and
consultancy fee come about due to farmer engaging suppliers of management and consultancy
services. The withholding tax paid will be granted as credit against any tax liability that may
arise (Income Tax (Amendment) Act no.19 of 2016) (ZRA, 2020).
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Withholding Tax – Commissions
Commissions for withholding Tax purpose means any commission other than commission
received by an individual whose income is from employment or office. The withholding rate for
residents is 15 percent and 20 percent non-residents and it is not the final tax. Farmers will need
to withhold the appropriate monies when paying out commissions, which must be remitted to the
Zambia Revenue Authority (ZRA, 2020).
Withholding Tax – Royalties
A royalty is defined in Income Tax Act as meaning a payment in any form received as a
consideration for the following:
use of or the right to use any copy right of literary, artistic, or scientific works, any patent,
trademark, design or model, plan, secret formula or process for the use of or the right to use,
industrial, commercial or scientific equipment or for information concerning industrial,
commercial or scientific experience.
Farmers will need to withhold the appropriate monies when paying out royalties, which will be
remitted to the Zambia Revenue Authority. The withholding tax rate for royalties is 15 percent
for residents and 20 percent for non-residents. However, in the case of non-residents this is the
final tax (ZRA, 2020).
Property Transfer Tax
The property transfer tax Act Cap 340 does provides for the charge of property transfer tax on
the transfer of property in this cases farmer transferring property, which should be reflected in
the farmers’ books of accounts.
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The property referred in this case defined as Land, including any improvements on it, and
intellectual property such as trademarks, patents, and brands. In addition, the term “transfer”:
relate to land, excluding letting or sub-letting, leasing, under-leasing or sub-leasing, for a period
of less than five years. Property Transfer Tax is charged at the rate of 5 percent of the open
market value realized from the sale of any land and building by the farmer.
It is worth noting that where a person transferring his property to a member of his immediate
family, the realizable value of such property is the actual price, if any received by transferor. The
term “immediate family” means, with respect to the person transferring the property: a spouse,
child, duly adopted child or stepchild. The realizable value is the value of the property liable to
charge or used has a base for charging property transfer tax. If its land and building, the open
market value. Furthermore, note that there is no capital gains tax in Zambia. Instead there is what
is known as Property Transfer Tax which is levied on the sale or deemed sale of all immovable
property.
Where a farming unit/venture is part of a group of companies, a company transfers property to
another company (other than a company which is not resident in Zambia) within the group for
the purposes of internal organization of the group, the Commissioner General may treat such
transfer as having no realized value. The term group of companies means a holding company
together with its subsidiary companies but excludes a situation where there is common
shareholding. Group companies, applying for nil transfer consideration via internal re-
organizations, will have to provide evidence of the existence of a group structure by presenting a
share ownership certificate and will require to meet the definition of a group (ZRA, 2020).
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2.1.2 Indirect Taxes
The Value Added Tax Act Cap 331 is an Act to impose a tax on the supply of goods and services
in Zambia and the importation of goods into Zambia.
Value Added Tax is defined: as a consumption-based tax that is levied in the supply, chain at
each point were value is added to goods or services. Since it is consumption based, the primary
legal way of a farmer avoiding Value Added Tax is by not consuming any goods or services that
are standard rated. The other way is by consuming only zero-rated or exempt supplies (ZRA,
2020).
Value Added Tax is incurred by the final person (farmer), in the chain of supply who is not
registered for Value Added Tax. Farmers registered for VAT will claim back through the return,
the input VAT incurred in the course of their business and remit to Zambia Revenue Authority,
the Output VAT collected in excess of their input VAT. Taxable supplies are taxed at 16 percent
(standard rated) or 0 percent (zero-rated). Zero-rated supplies include exports, farm equipment
and farm machinery, etc. Exempted supplies are items specifically excluded by law from liability
to value added tax, even if supplied by a registered business.
Import VAT is Value Added Tax charged on imports. Whereas Domestic VAT however is
generated internally via internal supply chain. Domestic VAT is a tax borne by the consumer.
For Value Added Tax purposes, sale or disposal of goods or rendering of services is called
supplies.
Businesses are required to apply for VAT registration if they deal in taxable goods and services.
And only registered business can charge and claim value added tax. Zambia has two types of
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value added tax registrations as follows: Statutory registration in the case of an annual taxable
turnover in excess of K800 000 (ZRA, 2020).
Voluntary registration in cases where the turnover of a business is below K 800 000 per annum
but the business has fulfilled all the requirements for value added tax registration. A VAT
registered business charges and collects value added tax on its supply of goods and services to
customers. The Value added tax so charged is called output tax. On the other hand, a value added
tax registered business claim the value added tax that they pay on purchases of taxable goods and
services for their business. This tax so claimed is referred to as input tax. The net balance of
output and input tax is to be paid to the Zambia Revenue Authority or refunded to the taxpayer as
the case may be. Further note that a business dealing in taxable supplies can claim input tax,
while a business dealing in exempt supplies are not required to register for value added tax and
therefore cannot claim the input tax (ZRA, 2020).
A “non-established business” is a business that does not have a fixed establishment in Zambia. A
foreign company may not register for Zambian value added tax unless it has a place of business
in the country. It must also make taxable supplies of goods or services. Recovery of Value added
tax by non-established business is only limited to exports. The term “taxable supplies” refers to
supplies of goods and services that are liable to a standard rate of value added tax, including the
zero rate. The following are some examples of goods and services taxable at zero percent:
Exports of goods, Foreign aid donations, Bread and wheat, etc. The term “exempt supplies”
refers to supplies of goods and services that are not liable to tax. Persons that make exempt
supplies are not entitled to input tax deduction (Section F).
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The following are some examples of exempt supplies of goods and services: Supply of water and
sewerage services, most public transport services, Real estate transactions, Basic foods,
Agricultural supplies, etc. A taxable person may recover input tax, which is value added tax
charged on goods and services supplied to it for business purposes. Input tax is claimed by
deducting it from output tax, which is value added tax charged on supplies made. Input tax
includes value added tax charged on goods and services purchased in Zambia and value added
tax paid on imports of goods and services.
We have also a case of non-deductible input tax. Value added tax might not be recovered on
purchases of goods and services that are not used for business purposes (for example, goods
acquired for private use by an entrepreneur). In addition, input tax may not be recovered on
certain business expenses. Below is a list provided, indicating some examples of items of
expenditure for which input tax is not deductible, and of items for which input tax is deductible if
the expenditure is for purposes of making a taxable supply.
The following are examples of items for which input tax is non-deductible:
1. Office, home and mobile telephone service
2. Domestic refrigeration equipment, air conditioners, mobile phones, motor vehicle parts,
digital satellites, construction of dwelling houses for staff
3. Fuel for passenger vehicles
4. Petrol
5. Diesel (recovery restricted to 90 percent)
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The following are examples of items for which input tax is deductible (if related to a taxable
business use):
1. Purchase, hire and maintenance of commercial motor vehicles
2. Mobile telephone handsets
3. Hotel accommodations
4. Utilities
5. Educational material
Furthermore, in case of partial exemption. Value added tax directly related to making exempt
supplies is not recoverable. A registered person who makes both exempt and taxable supplies
may not recover VAT tax in full (which is all the case with farmers). This situation is referred to
as “partial exemption.” In Zambia, if a taxable person supplies both taxable and exempt goods
and services, the amount of input tax recoverable is calculated using a simple pro rata method
based on the value of taxable and exempt supplies made.
In the case of refunds of value added tax paid. If the amount of input tax in a period exceeds the
amount of output tax due, a taxable person may request a value added tax refund. Value added
tax refunds is supposed to be paid within three months. However, no interest is payable if the
refund is paid late. In case of pre-registration costs. Businesses registered within one month after
becoming liable to register are eligible to claim input tax incurred three months prior to
registration. Zambia does not generally refund value added tax incurred by a foreign business
unless it is registered for value added tax there. However, a refund scheme allows a value added
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tax refund to be paid to a non-established business that purchases goods from a Zambian value
added tax-registered supplier for onward export. The refund scheme applies to foreign passport
holders that are on a business visit to Zambia. The scheme applies only to commercial export
consignments that do not otherwise qualify for value added tax zero rating. The refund is
restricted to value added tax paid on goods supplied by a participating supplier. Value added tax
incurred on other expenditure in Zambia is not recoverable using this scheme.
2.1.3 Customs and Excise
The legislation framework relating to the regulation and administration of taxation levying
import duty and excise duty is provided for in the Customs and Excise Act Cap 322, SI 54 of
2000, and a number of Statutory Instrument (SI), which are issued by the finance minister.
The Customs and Excise Act requires every person importing and exporting goods to forst and
foremost declare the goods correctly that is in terms of quantities, goods specifications,
classification, origins and value. Failure to declare and or false declaration whether intentional or
due to ignorance may attract penalties, or seizure of goods, and or imprisonment. Therefore its
very important that a farmer has some working ideal on the requirements and procedure covering
import and export procedures and general category of applicable duty rates for farm inputs and
farm products (ZRA, 2020).
Import Duty (CD)
Tax type, import duty is a tax levied on goods coming into the country. Duty is based on the CIF
(cost, insurance and freight) value. Valuation of goods for both import and export in Zambia
follows the GATT valuation methods as required by the world customs organization (WCO)
which Zambia is a member and signatory of the Kyoto convention.
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There are three categories for import duty rates:
0% Raw materials (seeds, fertilizers, veterinary drugs, pumps, animal feed supplements, etc)
5% Capital goods (equipment and machineries, etc)
15% Intermediate goods (spares, etc)
25% Finished goods (Wire fences, work suits, safety gears, etc)
However, the government may impose higher import duty rates than normally applied on
selected goods to encourage local production (to boost manufacturing sector) (ZRA, 2020).
Export Duty (EXD)
Tax type, export duty is a duty charged on specific exported goods like cottonseed. The duty is
meant to encourage further processing or local value addition. The valuation of exports is its fob
value (free on board) (ZRA, 2020).
Advance Income Tax (AIT)
Tax type, advance income tax is the tax charged on importers that are either not registered with
Zambia Revenue Authority or are registered but are not compliant. The advance income tax are
computed at 15 percent of the CIF (cost, insurance and freight) (ZRA, 2020).
2.2 Taxes incentives that impact on Agriculture as a Business
A country’s tax regime is always a key factor for any business undertaking especially an
agriculture related business venture considering moving into new markets. What is the corporate
tax rate? Are there any incentives for direct foreign investment in the agriculture sector? Are
there double tax treaties in place? How will foreign sourced income be taxed?
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2.2.1 Direct taxes
The following are some tax incentives that are given under the direct tax category:
1. Income taxed at a reduced rate of 10 percent for farming business
2. Farm improvement allowance at 100 percent on fencing appropriate to farming, and farm
dwelling occupied by farm workers whose origin cost is not in excess of K20 000.
3. Increase capital allowance rate to 100 percent from 50 percent implements, plant and
machinery used in farming and agro – processing.
4. Development allowance is given for any person who incurs expenditure on the growing
of coffee, coffee, or citrus trees, or banana plants, or other similar plants or trees. An
allowance of 10 percent of such expenditure shall be deducted in ascertaining the gains or
profits of that business.
5. Dividends paid out of farming profits are exempt from tax for the first five years the
distributing company commences farming.
6. Farm works allowance at 100 percent for the full cost of stumping and cleaning, works
for prevention of soil erosion, boreholes, wells, aerial and geophysical surveys and water
conservation (ZRA, 2020).
Indirect Taxes
1. Guaranteed input tax claim for four year prior to commencement of production for
vatable agriculture business.
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2. Value added tax (VAT) deferment on importation of some agricultural equipment and
machinery.
3. Zero rating of taxable agricultural products and supplies when exported (ZRA, 2020).
Customs and Excise
1. 0% Customs duty on machines tools (including presses) for working metals by forging
2. 0% Customs duty on tools for working in the hand
3. 0% Customs duty on syringes used in medical, surgical, dental or veterinary sciences
4. 0% Customs duty on mixing, kneading, crushing, grinding, screening, sifting,
homogenizing, emulsifying or stirring machines
5. 0% Customs duty on electronic motors & generators (excluding generating sets and
rotary converters (ZRA, 2020).
CHAPTER THREE
3.0 Research Methodology
3.1 Objective
I chose to conduct twelve individual interview as well as investigate existing literature to explore
the effect of current taxation on agriculture as a business in Zambia. However, due to the
coronavirus virus Zambia Revenue Authority have in line with government directive of social
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distancing has put some officers to be working from home. This impediment on accessing the
twelve targeted/selected official hence reducing to eight officials.
3.2 Research Question
As context, the research first looked at all the taxes administered by the Zambia Revenue
Authority, which applies or impact on farming business. This involves taxes falling under the
Zambia Revenue Authority operating division, which are Customs Services, Direct Tax Services
and Indirect Tax Services. In addition the study then looked to shade, more light on the
comprehensive list of taxes that a farmer is expected to comply with in accordance with the laws
of Zambia. Furthermore, the study looked to measure to some extent the financial impact on the
farmers’ books of accounts. The study also looked to bring out and to some extent measure or
shade, more light on the tax incentives that are available to the farming sector.
To summarize the study looked to answer the following research questions:
1. What are the tax type that the farm business is obligated to comply with under the current
taxation regime?
2. How do these relevant tax types financially affect the books of account of the farmer?
3. What are the tax incentives available for the farmer under all the Zambia Revenue
Authority operating divisions (Customs Services, Direct Tax Services and Indirect Tax
Services)?
4. How do these relevant tax incentives financially affect the books of accounts of the
farmer?
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5. Answering the above four research questions will provide the answer to “on whether its
possible to consolidate all the tax types and tax incentives affecting the farming as a
business under on umbrella document (limited to taxes administered by the Zambia
Revenue Authority?”
3.3 The Research Design
Below are the identified most appropriate main research strategies, data collection techniques
and analysis procedures. The general plan of how I went about answering the research question
was via explanatory case study research approach. Using the explanatory case study approach
two, ways of conducting the research where employed. This included:
1. A search of the literature: which involved specific literature from the tax authority, and
relevant Zambian taxation literature
2. Interviewing tax experts: will involve interviewing relevant Zambia Revenue Authority
officials who handle specific tax issues.
3.3.1 Research Strategies
The main research strategy was via a case study method. This facilitated development of details,
and expected to provide a rich understanding of the research question. The case study was based
on a holistic case study approach covering all the relevant tax type and tax incentives
administered by the Zambia Revenue Authority.
3.4 Review of Data Collection Methods
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The main source of both data and information was from the Zambia Revenue Authority
information platforms. The principle category of information involved tax information affecting
the farmer. The information gathered among others was a comprehensive list of taxes, tax rates,
tax explanation notes, tax bases, tax incentives/waivers, tax impact on cost, tax impact on profits,
tax and investment, tax impact on cash flows, tax impact on margins, etc.
The sources of tax data involved internal and external sources, and primary and secondary
sources. The main type of data collection techniques I employed for the research where
documents and Interviews.
3.4.1 Primary Information
The relevant primary data and information where collected using in-depth interviews method
involving eight relevant tax officials. The other source of the primary data was the principle Acts
like Customs and Excise Act Cap 322, Income Tax Act Cap323, Value Added Tax Act Cap 331,
etc (ZRA, 2020).
3.4.2 Secondary Information
The relevant secondary information was be collected using internet based databases, tax books,
ZRA Publications, tax journal. It involved a comprehensive literature review.
Documents
This did involve, for example, reading and analyzing the published tax information documents
from various sources and platforms. Primarily Zambia Revenue Authority information platform
provided most of the information. The challenge with the Zambia Revenue Authority
information platform is the information overload making it very difficult for farmer to select tax
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type and tax incentives that are relevant to them. More documents where considered including
among others Tax Publicity materials, tax information journals and books. The gathered
information where used to facilitate formulating interview questions or start discussion (ZRA,
2020.
Interviews
The interviews were conducted using the popular face to face on an individual bases, telephone
interviewing and using WhatsApp communication means. The original plan was to interview
twelve officers from all the operating division of the Zambia Revenue Authority. However, due
to the coronavirus virus Zambia Revenue Authority have in line with government directive of
social distancing has put some officers who I was hoping to interview to be working from home.
This prompted me to adjust my interviewing program as follows:
Customs Services (Livingstone Port) – Tax type import duty, export duty and tax incentives
1. I interviewed using face-to-face method one officer at customs client desk: Mainly to
seek clarification on a number of customs related tax issues.
2. I interviewed using telephone method one official from Credibility and Control section of
the Customs Services at Zambia Revenue Authority head office (HQ).: Mainly to seek
clarification on the tax incentive available for the agriculture sector.
3. I interviewed using face to face method the station manager at Livingstone Port: Mainly
to seek clarification on a number of customs related tax issues
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Direct Tax Services (Livingstone and Kitwe Offices) – All relevant type types and tax incentives
1. I interviewed using face-to-face method one officer at Livingstone client desk: Mainly to
seek clarification on a number of direct tax related tax issues.
2. I interviewed using telephone method one officer at Kitwe Nchanga house ZRA client
desk: Mainly to seek clarification on a number of direct tax related tax issues.
3. I interviewed using face-to-face method the senior inspector (station manager) at
Livingstone Direct tax: Mainly to seek clarification on a number of direct tax related tax
issues.
Indirect Tax Services (Livingstone) – All relevant type types and tax incentives
1. I interviewed using face-to-face method one officer at Livingstone client desk:
Mainly to seek clarification on a number of value added tax (VAT) related issues.
2. I interviewed using WhatsApp method the senior inspector at Livingstone indirect
tax: Mainly to seek clarification on a number of indirect tax and incentives related
issues.
3.5 Data Analyzing Procedure
Looking at the nature of the study, which is primarily an explanatory case study, which has a
adequate available information but seriously faced with an impediment of information overload.
That is why farmers seem mostly lost, not knowing which tax type and tax incentive apply to
them. What the research is trying to achieve which is to answer the research question played a
part in deciding the way in which the data were analyzed.
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The appropriate analysis of the collected data did consist of two stages:
1. Sorting of the data gathered from the different websites primarily from the Zambia
Revenue Authority information platform. In addition, copies of the different statutory
instruments, tax law books and copies of Acts (Law) empowering the Zambia Revenue
Authority to collect taxes and administer tax incentive that impact on the farmer.
2. Analysis of the data was via content analysis procedures. Content analysis is “an
approach to the analysis of documents and texts that seeks to quantify content in terms of
predetermined categories and in a systematic and replicable manner (Bryman and Bell,
2003:195). This method of analysis was used, because it fitted this type of research which
has a challenge of information overload, and which has predetermined categories of tax
types specifically for the farmers and predetermined tax incentives specifically for the
farmers. The chosen procedure did seek to analyze tax related documents and texts to
quantify and evaluate content in terms of predetermined categories, and in a systematic
and replicable manner.
A viable competing option was using the Grounded theory approach of analyzing the data. This
approach was developed by Glaser and Strauss (1967), its actually a formal approach to
generating theory from qualitative data. Data collection and interpretation are intertwined, and
theory is generated from patterns that emerge in the data (Bryman and Bell, 2003).
However, I could not use this approach due to the challenges that come with this approach
examples: a theory as the final outcome, time and effort to study the data in the depth necessary
to build theory.
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Limitations
In conducting the research as per research strategy, I experienced a number of challenges which
ended up limiting some part data collection. This is mainly due to the coronavirus virus, Zambia
Revenue Authority have in line with government directive of social distancing have put some
officers to be working from home. This impediment on accessing the twelve targeted/selected
officials hence reducing to eight officials.
I also faced a challenge in interview all the eight officials on face-to-face bases, however, I had
to arrange the interview for to be done via cell phone for the four out of eight officials.
Furthermore, one key officer from Indirect taxes had to be interview via WhatsApp means to
clarify on some indirect tax issues.
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CHAPTER FOUR
4.0 Findings and Results
The interviews and literature review allowed a privileged insight into the effect of current
taxation on agriculture, as a business in Zambia. Below are the significant and comprehensive
findings to the research question: The opening question was to gain insight into the all tax types
that the farming business is obligated to comply with under the current taxation regime. The
following are the findings and results:
4.1.1 Direct taxation
1. Company/ Corporate tax (CT)
Income tax is tax on profit made by agriculture operatives registered under Limited Companies
and self-employed individuals (farmers). All profit making persons have an obligation to pay
Income tax on their profits. Company tax applies on agriculture operators whose turnover is
above K800 000 per annum
2. Turnover Tax (TT)
Any person carrying on business (farming) with an annual turnover or income of
K800 000 or less is liable to pay turnover tax. The turnover tax on business apply for both
operating has a limited company, cooperatives and on individual base as a farmer.
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4.1.2 Withholding Tax (WHT)
Withholding tax is tax-collected source from some payments like rent, management and
consultancy fees, commissions, royalties and foreign contractors’ payments.
Withholding Tax – Rentals
This affect rented out farmhouses, farm warehouses, farmland, etc. The farmer must
ensure the tenant remit the withheld monies. The payer (tenant) is responsible for
deducting withholding tax from gross rentals on the date of accrual of any amount due to
the payee (farmer).
Withholding Tax – Management and Consultancy fees
These cover management and consultancy fee come about due to farmer engaging suppliers of
management and consultancy services.
Withholding Tax – Commissions
Farmers will need to withhold the appropriate monies when paying out commissions,
which must be remitted to the Zambia Revenue Authority.
Withholding Tax – Royalties
Farmers will need to withhold the appropriate monies when paying out royalties, which will be
remitted to the Zambia Revenue Authority.
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3. Property Transfer Tax (PTT)
The property transfer tax Act Cap 340 does provides for the charge of property transfer
tax on the transfer of property in this cases farmer transferring property, which should be
reflected in the farmers’ books of accounts. The property referred in this case defined as
Land, including any improvements on it, and intellectual property such as trademarks,
patents, and brands.
Indirect Taxation
4. Value Added Tax (VAT)
Import VAT is Value Added Tax charged on imports. Whereas Domestic VAT however
is generated internally via internal supply chain. Domestic VAT is a tax borne by the
consumer. For Value Added Tax purposes, sale or disposal of goods or rendering of
services is called supplies.
Businesses are required to apply for VAT registration if they deal in taxable goods and services.
And only registered business can charge and claim value added tax.
Customs and Excise taxation
5. Import Duty (CD)
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Tax type, import duty is a tax levied on goods coming into the country. Duty is based on the CIF
(cost, insurance and freight) value.
6. Export Duty (EXD)
Tax type, export duty is a duty charged on specific exported goods like cottonseed. The duty is
meant to encourage further processing or local value addition.
7. Advance Income Tax (AIT)
Tax type, advance income tax is the tax charged on importers that are either not registered with
Zambia Revenue Authority or are registered but are not compliant.
The second question was to gain insight into the tax type financial effect on the farmers’ books
of accounts under the current taxation regime. The following are the findings and results:
Direct taxation
1. Company/ Corporate tax (CT)
The Zambia Revenue Authority levies corporate tax from the agriculture sector at 10%.
2. Turnover Tax (TT)
The applicable tax rate is 4% of gross sales/turnover. Further note that when determining the tax
payable for the period the K3 000 month exemption will no longer be applicable.
3. Withholding Tax (WHT)
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Category Charge year 2020
Rentals (Final tax) 10%
Non-resident contractors 20%
Commissions to non-residents 20%
Commissions to residents 15%
Royalties to non-residents 20%
Royalties to residents 15%
Management and Consultancy fees to residents 15%
Management and Consultancy fees to non-residents 20%
Table 4. 1: Table 2. 3: Withholding tax rate. Source: Adopted from ZRA (2020)
4. Property Transfer Tax (PTT)
Property Transfer Tax is charged at the rate of 5 percent of the open market value realized from
the sale of any land and building by the farmer.
Indirect Taxation
5. Value Added Tax (VAT)
Taxable supplies are taxed at 16% (standard rated) or 0% (zero-rated). Zero-rated supplies
include exports, farm equipment and farm machinery, etc. Exempted supplies are items
specifically excluded by law from liability to value added tax, even if supplied by a registered
business.
Zambia has two types of value added tax registrations as follows:
Statutory registration in the case of an annual taxable turnover in excess of K800 000.
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Voluntary registration in cases where the turnover of a business is below K 800 000 per annum
but the business has fulfilled all the requirements for value added tax registration.
Customs and Excise taxation
6. Import Duty (CD)
There are three categories for import duty rates:
0% Raw materials (seeds, fertilizers, veterinary drugs, pumps, animal feed
supplements, etc)
5% Capital goods (equipment and machineries, etc)
15% Intermediate goods (spares, etc)
25% Finished goods (Wire fences, work suits, safety gears, etc)
7. Export Duty (EXD)
Tax type, export duty is a duty charged on specific exported goods like cottonseed at 10%.
8. Advance Income Tax (AIT)
The advance income tax are computed at 15 percent of the CIF (cost, insurance and freight)
The third question was to gain insight into the tax incentives available to farmers under all the
Zambia Revenue Authority operating division/services. The fourth question was to also gain
insight into the above tax incentive possible financial effect on the farmers’ books of accounts
under the current taxation regime. The following are the findings and results:
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Direct taxation
1. Income taxed at a reduced rate of 10 percent for farming business
2. Farm improvement allowance at 100 percent on fencing appropriate to farming, and
farm dwelling occupied by farm workers whose origin cost is not in excess of
K20 000.
3. Increase capital allowance rate to 100 percent from 50 percent implements, plant and
machinery used in farming and agro – processing.
4. Development allowance is given for any person who incurs expenditure on the
growing of coffee, coffee, or citrus trees, or banana plants, or other similar plants or
trees. An allowance of 10 percent of such expenditure shall be deducted in
ascertaining the gains or profits of that business.
5. Dividends paid out of farming profits are exempt from tax for the first five years the
distributing company commences farming.
6. Farm works allowance at 100 percent for the full cost of stumping and cleaning,
works for prevention of soil erosion, boreholes, wells, aerial and geophysical surveys
and water conservation.
Indirect Taxation
7. Guaranteed input tax claim for four year prior to commencement of production for
vatable agriculture business.
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8. Value added tax (VAT) deferment on importation of some agricultural equipment and
machinery.
9. Zero rating of taxable agricultural products and supplies when exported.
Customs and Excise taxation
10. 0% Customs duty on machines tools (including presses) for working metals by
forging
11. 0% Customs duty on tools for working in the hand
12. 0% Customs duty on syringes used in medical, surgical, dental or veterinary sciences
13. 0% Customs duty on mixing, kneading, crushing, grinding, screening, sifting,
homogenizing, emulsifying or stirring machines
14. 0% Customs duty on electronic motors & generators (excluding generating sets and
rotary converters.
The fifth question was to gain insight into the possibility of consolidating all the tax type and tax
incentives on one umbrella document to enhance farmers’ awareness. This research question was
answered by the above findings and results.
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CHAPTER FIVE
5.0 Discussion and Recommendations This chapter discuss the findings from my research combining the views of interviewees with
insight brought forth in the literature. This study has identified significant findings on, “the effect
of current taxation on farming, as a business in Zambia”. The findings clearly highlighted that
the broadening of the tax base in the agriculture sector is possible for as long as the farmers
comply with their current tax obligations. The finding have also highlighted the need to extent
and providing taxpayer education to the farming community especially small to medium school
farmers. It is in the best interest of the farmers to comply because the law has a way of catching
up with the offenders and the law does not accept ignorance. Below are significant finding for
discussion grouped under direct taxation, indirect taxation and customs taxation.
5.1 Discussion
5.1.1 Direct taxation
Company/ Corporate tax (CT)
All profit making farmers have an obligation to pay Income tax on their profits. Company tax
applies in this case to farmers whose turnover or annual gross is above K800 000 per annum.
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This mostly covers the medium to large-scale farmers. It was sad to learn from the interview that
very few medium scale farmers, and in some areas, no farmer is compliant. More taxpayer
education is needed to enhance compliance levels. Further research is need to establish the
reasons for this non-compliance among the medium scale farmers.
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Turnover Tax (TT)
Farmers whose turnover or annual gross is K800 000 or less is liable to pay turnover tax. It
applies to all those operating has a limited company, cooperatives and on individual base as a
farmer. This mostly covers the small to medium scale farmers. It was sad to learn from the
interview that turnover tax, compliance level are extremely bad among the farmers. More
taxpayer education is needed to enhance compliance levels. Further research is need to establish
the reasons for this non-compliance among the farmers.
Withholding Tax (WHT)
Farmers are also subject to withholding tax on payments like rent, management and consultancy
fees, commissions, royalties, and foreign contractors’ payments. Farmers’ may venture into
secondary income generation ventures usually to supplement their normal farm income. These
are subject to normal tax obligation guidelines as stipulated under the respective tax Acts.
A farmer renting out part of the property has to comply with the withholding tax on rental
income obligation. The conducted interview finding revealed that most farmers renting out
farmhouses especially to contractors and those renting out farm warehouses for storage example
for grain storage are not remitting withholding taxes as required by the law under the
withholding tax guidelines. The farmer should ensure they get a copy of proof of payment or
remittance to Zambia Reveune Authority. Without this proof of remittance, the revenue authority
will demand this payment from the farmer (property owner).
The research findings on the withholding tax further revealed that other payments which are
made by the farmer are actually subject to withhold tax. The farmer need to ensure as a payee to
withhold the stipulated tax percentage out of the payment for remitting to Zambia Revenue
- 41 -
Authority. Consequently, payment will be required from the payee (farmer in this case) for
failing to remit the withholding tax. The farmers’ must be made aware that it’s their legal
obligation as a payee to remit the tax.
Property Transfer Tax (PTT)
The research finding brought out the issue of property transfer tax, which arises when farmers
sell property, it may be selling part of their farmland or any property the farmer has invested. In
other cases farmers’ sell their brand names for their products, in all these cases property transfer
tax will need to be paid.
5.1.2 Indirect Taxation
Value Added Tax (VAT)
Farmers will need to prudently manage the value added tax factor in order to minimize its
negatives effect on the farmers production cost. Value added tax mitigation measures and
arrangements will need to be employed which may involve among others measures to
incorporate value additional processes to their produces to push them to either zero-rated and
vatable to qualify for value added tax registration, this will allow the value added tax registered
farmer to be recovering some input VAT incurred. Lack of value added tax mitigation measures
will result into farmers incurring all the value added tax paid as a cost to production.
5.1.3 Customs and Excise taxation
Import Duty (CD)
Farmers’ need to know the prevailing tax rate to appreciate the importing cost which will
facilitating comparing options in order to manage cost.
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Advance Income Tax (AIT)
Tax type, advance income tax is the tax charged on importers that are either not registered with
Zambia Revenue Authority or are registered but are not compliant. Research finding revealed
that most farmers are paying this tax of 15% on farm imports due to them failing to comply in
registering for the relevant tax type.
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CHAPTER SIX
5.1 Recommendations
From the forgoing, the following are the recommendations:
1. First and foremost current taxation policy towards the agriculture sector (farming) should
continue in order to advance the positive effects of the low taxes rates and favorable tax
incentives. These if prudently managed will in the long run broaden the tax base to some
extent.
2. The government should engage the farming community with the view of sensitizing them
on the importance of contributing to national coffers. The need to meet their reasonable
share of tax obligation. The possible taxes from the farmers can be used in redistribution
within the agriculture sector example is buy providing infrastructures to support the
farming business, funds may even be used to provide agriculture subsidies to cushion off
unfair foreign competition to local agriculture.
3. Zambia Revenue Authority should come up and employ a robust taxpayer education
campaign directed to the farmers. They need to find a cost effective and efficient means
of enhancing tax compliance.
4. Zambia Revenue Authority should relook at their information literature with a view of
consolidating tax types information to meet the obligational needs of specific taxpayers
categories. In simple terms they need to lump all the tax obligations for a specific
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taxpayer category like farmers under one umbrella document. This is what this paper has
actually managed to do via answering the first four research questions.
5. Zambia Revenue Authority should start viewing and working with the proper
understanding, that taxpayer education is the first step in broadening the tax base
(interview findings).
6. Further research is need to establish on why the compliance level are low among the
farmers. This is despite the very low tax rates as highlighted by this research. The low
taxes are even further reduced by the favorable tax incentives compared with other
sectors of the economy.
6.0 Conclusion The purpose of this research was to determine the effect of current taxation on agriculture as a
business in Zambia. A review of the relevant literature and interviews highlighted the fact that
current taxation regime does actually provide for favorable tax rate for the agriculture sector and
tax incentives to promote with a view of promoting investment and reinvestment in farming. The
effect of the tax incentives on the farmers’ books of accounts, to reduce the already low tax
obligations/payments. These favorable tax arrangements should ideally have encouraged higher
compliance levels on the part of the farmers but it is sad to say the opposite is the case according
to my research findings. This finding support the general view by government stakeholders that
the farming sector is not contributing their fair share of taxes commensurate with their tax
potential.
The data, collected via qualitative means, indicates that tax compliance levels among the
farmers’ is very bad despite the very favorable current tax regime. The finding also revealed an
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overload of tax types eight in total, which directly and indirectly affect the farmers’ profitability.
These tax types should have been consolidated into fewer tax types for easy understanding,
compliance and self-assessment.
In short, Zambia Revenue Authority has not gone a good job to simplify farmers’ tax obligation
and information with consideration to the educational level among the farmers. The tax
information on Zambia Revenue Authority information platforms is not user friendly the end
users (farmers) even highly educated farmers find it nearly difficulty to know and understand
their full tax obligations. Taxpayer education for the farmers’ needs enhancing for the situation
to be corrected, and to contribute the expected tax revenues. This will go a long way to justify
the tax revenues the government is forgoing through low tax rates and tax incentives.
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7.0 REFERENCES
1. Zra.org.zm (2019). Zambia Revenue Authority Official Website. [online] Available at:
http://www.zra.org.zm/ [Accessed on 01 April 2020]
2. Zambia Revenue Authority (2020), Customs and Excise Act volume 18, Cap 322 of the
Laws of Zambia, Viewed 02 April 2020 < http://www.zra.org.zm/wp-
content/uploads/2019/12/UPDATED-CUSTOMS-TARRIF-Book-AS-OF-04-01-
2019_1.pdf >
3. Zambia Revenue Authority (2020), Practice Note No. 1 of 2019, Viewed 02 April 2020 <
http:www.zra.org.zm/wp-content/uploads/2020/01/2019-PRACTICE-
NOTES06022019081245-5-1.pdf >
4. Zambia Revenue Authority (2020), Practice Note No. 1 of 2018, Viewed 02 April 2020 <
http:www.zra.org.zm/wp-content/uploads/2020/01/2018-PRACTICE-NOTES-1.pdf >
5. Zambia Revenue Authority (2020), Practice Note No. 2 of 2017 VAT Rules, Viewed 03
April 2020 < http:www.zra.org.zm/wp-content/uploads/2020/01/2017-PRACTICE-
NOTES-2-VAT-RULE.pdf>
6. Zambia Revenue Authority (2020), Income Tax Act, Cap 323 of the Laws of Zambia,
Viewed 04 April 2020 < https://www.zra.org.zm/tax-information/#income-tax >
7. Zambia Revenue Authority (2020), The Value Added Tax Act, Cap 331 of the Laws of
Zambia, Viewed 05 April 2020 < https://www.zra.org.zm/tax-information/#VAT >
8. IAPRI (2017), Indaba Agriculture Policy Research Institute, Viewd 05 April 2020
http://fsg.afre.msu.edu/zambia/index.htm
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