STATEMENT BY THE MINISTER OF FINANCE AND NATIONAL PLANNING DR. SITUMBEKO MUSOKOTWANE, MP, ON PUBLICATION OF THE FIRST EVER TAX EXPENDITURE REPORT (TER)
The Ministry of Finance and National Planning wishes to announce the publication of the first ever Tax Expenditure Report. The Tax Expenditure Report for the fiscal year 2023 has been prepared in compliance with section (7) (1) (o) of the Public Finance Management Act of 2018. It is also in fulfilment of the UPND Government’s commitment to enhancing transparency and accountability in the management of public resources.
Tax expenditures are a way for the Government to support specific economic or social objectives by forgoing tax revenue. They fall into broad areas of deductions, credits, exemptions, differential rates, deferrals, tax holidays, among others. They encompass any deviation from the standard rate or baseline regime with the aim to stimulate economic growth by encouraging investment in key sectors, attracting both domestic and foreign investment, promoting social equity and supporting emerging industries. Tax expenditures are captured across tax types, policy aims, and sectors.
Specifically, granting tax reliefs has enabled the Government to attract investments in various sectors including Multi-Facility Economic Zones (MFEZ’s) and rural areas. Most of these investments are in the manufacturing sector contributing to economic growth and creating job opportunities for our people. Due to the conducive and attractive investment climate, by December 2024, the Government managed to attract actualised investment worth USD 9.83 billion. With respect to employment creation, by December 2024, 40,395 jobs were actualised against pledged employment of 38,119. Further, tax relief granted by the Government has included the tax credit for persons with disabilities and support to various Public Benefit Organisations (PBOs). Tax expenditures accounted to Public Benefit
Organisations has enabled the Public Benefit Organisations to provide free or low-cost services in the areas of education, health, water and sanitation, orphanages and other humanitarian relief services throughout our country.
Granting tax expenditures may initially result in reduced Government revenue collections in the short-run, however, we have no doubt that the relief eventually contributes to the raising of more tax collections due to the economic growth that it stimulates. A strong economy anchored on increased investment flows increases the revenue base and the Government’s capacity to finance infrastructure and public services.
Tax expenditures have contributed to enhancing economic growth, reducing poverty and improving social equity. Notwithstanding, the Government remains committed to ensuring that tax expenditures remain carefully aligned with the long-term goal of inclusive growth, transparent and sustainable fiscal policy. To this end, all tax expenditures shall remain well targeted and shall be monitored with the collaboration of all stakeholders to ensure efficient use of limited financial resources.
Lusaka, 31st December, 2024