December 20, 2006, Zambia Daily Mail

THE International Monetary Fund’s(IMF) proposals to reintroduce value added tax (VAT) on food and other commodities, is not a progressive or development oriented measure, Consumer Unity & Trust Society Africa Resource Center (CUTS ARC) has said.

And CUTS-ARC says good tax policy is that which does not impose tax on basic commodities but one that imposes tax on luxury goods.
CUTS-ARC regional advisor, Sajeev Nair, said Government was promoting agriculture and food security and imposing taxes on agricultural products would not help in ensuring food security in the country.
Mr. Nair said there was need to look at the main reasons for tax, being the transfer of resources from one society to the other.
“Only luxury goods should be taxed and not basic commodities because that would affect the people, “he said in an interview in Lusaka yesterday.
Mr. Nair said there was need for the transfer of resources on equity basis from the rich to the poor.
He also pointed out that Zambia was far from achieving the Millennium Development Goals and increasing tax on learning materials.
He said already the prices of learning materials were very high and that increasing taxes would make the materials unaffordable to the people.

IMF has recommended the re-introduction of VAT on food and other agriculture products, on water and sewerage and newspapers, among other tax proposals, for next year’s budget.

The IMF has also advised the government to resist pressures to re-introduce “extensive generous tax incentives based on tax holidays and rate reductions.”
In its October 2006 report, the IMF argues that there are several weaknesses in Zambia’s tax system, which needs to be corrected.