The impact of the customs and exercise remission regulations(Tax incentives)on investment in Zambia

Abstract

The subject of tax incentives has become wide spread in a world that is more and more globalized. Tax incentives exist in various forms and these include tax holidays, remission of customs duty, location based incentives, to mention but a few. It has been recognized world over that tax incentives increase investment, especially foreign direct investment (FDI), which in turn fosters economic development. It is for this reason that the impact of tax incentives on investment has been extensively debated on both in the international and regional sphere. This paper looks at the law regulating tax incentives in Zambia and highlights its shortcomings by analysing among others, the legal framework within which tax incentives such as the remission of duty operate and to what extent it has successfully enforced these tax incentives in Zambia. Further whether the application of the law relating to the tax incentives achieves the required end result and if not the flaws in the laws regulating tax incentives and enforcement mechanisms.To answer these research questions a study was done on Zambia and other regions, namely SADC (Southern African Development Community) and MENA (Middle East and North Africa). From the study it was observed that there are laws regulating tax incentives and enforcement mechanisms that have been designed to ensure that tax incentives are implemented in Zambia. However these laws and enforcement mechanisms were found to be characterised by the following flaws: The loss of revenue by the government; Neutrality of costs instead of correcting market failure; Enforcement and compliance costs; The lack of transparency; and complexity of tax systems.In order to achieve the positive impact on investment in Zambia, that is to achieve the required the end results the following are the recommendations made: Improvement of the administration;Amendments to the legislation; Improving publicity and access to information; Adoption and implementation of policies; Increase of transparency levels; and Addressing the complexity of tax systems.