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The Zambia Revenue Authority (ZRA) has confirmed that it owes K17.8 billion in unpaid Value Added Tax (VAT) refunds across all sectors, with the mining industry being the largest creditor.
As of September 31, 2024, the Mining and Quarrying sector was owed K15.4 billion, which accounted for 87 percent of the total VAT refunds.
The wholesale and retail sector ranked second with K709 million owed, while the manufacturing sector followed in third place with K378 million in unpaid refunds.
This was revealed by ZRA’s Corporate Communications Manager, Oliver Nzala, in a statement issued on Thursday in Lusaka.
Nzala was responding to recent remarks made by Zambia Association of Manufacturers (ZAM) President, Ashu Sagar, and published in the Zambia Monitor claiming that ZRA owed more than K19 billion in unpaid VAT refunds to the manufacturing sector.
Nzala clarified the situation, stating that ZRA has been diligently addressing the backlog since November 2021, operating on a First In First Out (FIFO) basis, with priority given to older refund claims.
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“Through its commitment to dismantling the tax refund backlog and fostering timely payment of refunds, the government has put in place various measures to enhance refund processing efficiency,” Nzala said.
“These include, among others, approving that input VAT claims from January 1, 2025, will be processed through the Smart Invoice system, which will improve efficiency in refund audits and verification, and also approving the progressive increase in the monthly refund amount that has been experienced since November 2021.”
Nzala emphasized that since November 2021, the monthly VAT refund allocation had been increased from K1.35 billion to K1.7 billion.
He noted that this marked a significant improvement compared to the previous average monthly disbursement of K800 million.
Nzala explained that before the increase in 2021, ZRA was disbursing refunds averaging K800 million per month, while refund claims amounted to K1.6 billion monthly, leading to a growing backlog.
He attributed the escalation of unpaid refund stock, which had claims dating back to 2013, to this discrepancy between refunds paid and claims submitted.
“Due to this backlog of refunds and concerns about liquidity challenges caused by unpaid refunds to taxpayers, ZRA sought approval from the Ministry of Finance and National Planning to increase the refund amount to K1.35 billion per month.
Approval was granted, thereby increasing the monthly refund amount during the last three years to K1.35 billion in November 2021 from K800 million,” Nzala added.
He also pointed out that as of September 2024, the Ministry approved a further increase in the monthly refund amount to K1.7 billion to address liquidity challenges and reduce the accumulation of unpaid refund claims.
“This was with a view of alleviating liquidity challenges from unpaid refunds and also reducing the rate of accumulation of the unpaid refund stock,” he concluded.
While acknowledging the ongoing efforts, he said the ZRA remained focused on ensuring that businesses across the country experience improved cash flow through these measures, which are expected to enhance the overall efficiency of VAT refund processing.
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