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2021 Budget Highlights

Summary

On Friday, 25th September 2020, Zambia's Finance Minister Dr. Bwalya Ng’andu unveiled the country's 2021 budget which is aimed at stimulating economic recovery in the wake of the COVID-19 pandemic. The theme for the 2021 budget is “Stimulate Economic Recovery and Build Resilience to Safeguard Livelihoods and Protect the Vulnerable.”

Updated on : 15-10-2020


2021 Budget Highlights

 

 

On Friday, 25th September 2020, Zambia's Finance Minister Dr. Bwalya Ng’andu unveiled the country's 2021 budget which is aimed at stimulating economic recovery in the wake of the COVID-19 pandemic. The theme for the 2021 budget is “Stimulate Economic Recovery and Build Resilience to Safeguard Livelihoods and Protect the Vulnerable.”

 

In his address the Honorable Minister highlighted a number of key developments that will affect trade in the country:

 

ü  A key milestone in the road sector has been the completion of the US$298 million Kazungula Bridge linking Zambia and Botswana. The Bridge will facilitate increased regional trade and reduce transit time for freight and passengers. 

ü  With the coming into force of the Africa Continental Free Trade Area (AfCFTA) Agreement in 2021, Zambia will reposition herself to take advantage of the expanded market to the rest of Africa. The private sector have been challenged to harness the opportunity of the Agreement, to grow their business, access and penetrate the larger, continental market.

ü  Almost two years ago the Government Service Bus (GSB) was introduced for effective and efficient delivery of government services. Since the introduction of the GSB, a number of Government Agencies’ services are now using the Government payment gateway and these include: Road Transport and Safety Agency (RTSA), Patents and Companies Registration Agency (PACRA) and Immigration Services. The Minister of Finance stated that in 2021 more public services will be digitized to run on the Government Service Bus (GSB) and the Payment Gateway to provide efficiency, accountability and monitoring of revenues. 

ü  The Government will provide for the establishment of a Fund that will improve and develop infrastructure at our borders to enhance trade facilitation and border processing efficiency.

ü  The Government will put in place measures to manage container scanners in a sustainable manner in order to effectively fight smuggling among other vices. 

ü  The Seventh National Development Plan (7NDP, 2017 - 2021) comes to an end in 2021. Government has commenced the preparation of the Eighth National Development Plan covering the period 2022 to 2026. The Plan will provide a clear development agenda towards the attainment of the National Vision 2030. All citizens and stakeholders are urged to actively participate in the preparation of the Plan in line with the National Planning and Budgeting Policy. 

 

HIGHLIGHTS OF THE 2021 BUDGET

     The Tax measures that Government proposes include: 

Value Added Tax 

  1. To support the scaling up of agricultural productivity through mechanization, all Tractors will be zero-rated for VAT purposes. Currently, only tractors up to 90 Horse Power are zero rated.
  2. To combat the spread of COVID-19, equipment used for full body sanitization has been VAT zero-rated for a period of one year effective from midnight 25th September 2020. 

Customs and Excise

 

         i.            To revamp the horticulture and floriculture subsectors and to promote other nontraditional exports the following measures are proposed: 

a)      Suspend import duty on biological control agents

b)      Remove import duty on greenhouse plastics

c)      Reduce import duty to 15 percent from 25 percent on selected bulb plants and seedlings

d)     Reduce import duty on secateurs and pruners to 5 percent from the current 15 percent and 25 percent, respectively

e)      Remove import duty on selected agricultural clippers; and

f)       Remove export duty on crocodile skin.

       ii.            To stimulate economic activity in other sectors, the following measures are proposed:

a.       Remove import duty on copper ores and concentrates to encourage local processing; 

b.      Suspend import duty on importation of refrigerated trucks to support the domestic and export markets;

c.      Reduce import duty to 5 percent from 25 percent on selected trimmings to promote the local garments and textile industry; and

d.      Lower import duty to 15 percent from 30 percent on electric motor vehicles to reduce the use of fossil fuel.

     iii.            To support local production, build resilience and  mitigate the revenue loss arising from the aforementioned measures, the following is proposed: 

a.       Increase import duty to 40 percent from 25 percent on agro products such as beef and beef processed products, pork and pork processed products, chicken and chicken processed products as well as fish imported from outside the SADC and

COMESA regions;

b.      Introduce excise duty at the rate of K1.50 per litre on reconstituted milk; 

c.       Harmonize import duty rate on reconstituted milk with other forms of milk at 15 percent;

d.       Adjust the specific excise duty rate on cigarettes to K302 per mile from K265;

e.       Introduce a surtax at the rate of 20 percent on imported un-denatured ethyl alcohol of an alcoholic volume strength of 80 percent or higher; 

f.       Introduce excise duty on plastic flat bags at the rate of 30 percent; and

g.      Harmonize the import duty rates of cotton and polyester fabric at 15 percent ad valorem rate or K1.82 per kilogram whichever is higher.

     iv.            It is proposed to exclude high value motor vehicles from the definition of used motor vehicles and subject them to ad valorem import duty. 

       v.            To resuscitate the tourism sector and promote local tourism, the following measures are proposed:

      a.       Reduce corporate income tax rate to 15 percent from 35 percent on income earned by hotels and lodges on accommodation and food services;

b.      Suspend import duty on safari game viewing motor vehicles, tourist buses and coaches; 

Housekeeping Measures 

i.  It has been proposed to amend the Income Tax Act, Customs and Excise Act, Property Transfer Tax Act, Value Added Tax Act, ZRA and ZDA Act so as to update, strengthen and remove ambiguities in certain provisions of the tax laws and make tax administration more effective. The details of the proposed changes will be contained in the respective legislation that will be presented to parliament in due course.

             ii. The measures outlined herein will take effect on 1st January, 2021.

 


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