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Zambia’s tax efficiency is being undermined by a generous incentive regime and ongoing tax administration challenges, according to World Bank’s latest report.
In its Zambia Public Finance Review, the Bank highlighted that the country’s tax collection falls short of its potential, limiting the effectiveness of fiscal policy during economic downturns.
Read more: World Bank report highlights need for private funding in Zambia’s development agenda
During the presentation of the report at the 2025 National Budget session in Lusaka on Monday, held at the Mulungushi International Conference Centre, World Bank Country Director, Nathan Belete, noted Zambia’s weak budget credibility.
He stated that budget execution for goods and public investment frequently deviates, pointing to widespread project implementation issues across various sectors.
“Zambia’s fiscal position has become vulnerable, driven by weak fiscal governance and underperforming public sector investments,” Belete remarked.
He also pointed out that underperforming State-Owned Enterprises (SOEs), coupled with weak oversight, have added to the nation’s debt burden by accruing significant losses and liabilities.
Although Zambia’s revenue effort remained stable, Belete stressed that it was still below the average for Sub-Saharan Africa.
He called for the expansion of the tax base, particularly beyond mining, to enhance revenue potential and ensure sustained tax collection.
“With fiscal and debt pressures persisting and limited access to financing, Zambia must strengthen expenditure management and avoid past public investment mistakes that failed to drive economic growth and crowded out social spending,” he added.
Belete underscored the need to improve the administration of VAT and boost tax productivity while avoiding increases in VAT on basic consumption goods.
He recommended accelerating the rollout of the E-VAT system and using revenue windfalls to clear VAT refund arrears.
He also emphasized the need for stronger tax expenditure governance to minimise fiscal losses while maintaining economic competitiveness.
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