Withholding tax hampering operations of local consultants

 

THE use of withholding tax system by the Zambia Revenue Authority (ZRA) to improve tax collection efficiency will have adverse impact on operations of local consultants, says Zambia Institute of Chartered Accountants (ZICA) chief executive Hapenga Kabeta.

Mr Kabeta said using withholding tax system as a means of improving tax collection efficiency was a punitive measure and a disincentive to the growth of the consultancy subsector.

He said withholding tax brought about unbridled business practices where clients were awarded contracts at net value without taking into account any withholding tax deductions.

He said Government should instead work with various service industry regulators to ensure tax compliance was enforced.

“We think that using withholding tax system as a means of improving tax collection is a disincentive to the growth of the consultancy subsector.

“Government should instead work with various service industry regulators to ensure tax compliance is enforced through measures such as possessing a valid tax clearance certificates,” he said.

He said Government should provide default exemption from the withholding tax to taxpayers that were compliant if it was unwilling to reverse the measure.

Last December ZRA announced that effective 1st January 2016, management and consultancy fees payable to Zambian residents shall be subject to withholding tax at the rate of 15 percent.

The authority said tax deducted was not the final tax as the payee or consultant would be required to submit the annual income tax returns.

Responding to a press query, Mr Kabeta said while ZICA recognised that the measure would allow Government to receive all due taxes from residence consultants sooner, it would have adverse impact on operations of local consultants.

Mr Kabeta said collecting taxes at source made the affected taxpayers lose out on the profit they could be earning on their tax during the year.

“In a way, the withholding tax system forces tax payers to pay up sooner than the due date of corporate income tax, thereby exposing them not only to higher opportunity costs but also adverse cash flow constraints on the operations of local consultants,” he said.

Mr Kabeta however said the exemption currently may be available to taxpayers under Section 82A of the Income Tax Act but at the discretion of the commissioner general of ZRA.

“This is not optimal as the commissioner general mat reject an appplication for exemption without providing reasons or explaining his criteria for proving or rejection the application,” he said.

Categorized | Business

Comments are closed.

Our Sponsor

Jevic Japanese Auto Inspections

Social Widgets powered by AB-WebLog.com.