By BUUMBA CHIMBULU
THE incentives provided for in the 2022 National Budget under the Multi[1]Facility Economic Zone (MFEZ) seems to favour exporting companies to those producing for local consumption. This is according to the Zambia Association of Manufacturers (ZAM), Chief Executive Officer, Florence Muleya in a statement. As part of the non-tax measures in the 2022 National Budget, incentives have been pronounced that attract investment into the MFEZ, such as the reintroduction of the tax holiday where dividends of profits and profits on exports are zero rated for 10 years.
In addition, the Government proposed to reduce the threshold for a Zambian to invest in the MFEZ and access incentives from US$100,000 to US$50,000. “The incentives are a good move to attract investment into the MFEZ but seems to favour exporting companies to those manufacturing for local consumption,” Ms Muleya said. She said the reduction in the threshold for Zambians to access incentives in the MFEZ does not address the prohibitive cost of land which limits local investment.
Ms Muleya however said the reduction in the Corporate Income Tax (CIT) will encourage reinvestment in the sector and spur value addition. Finance Minister Situmbeko Musokotwane proposed a reduction of company income tax from 35 per cent to 30 per cent in the 2022 National Budget as part of the measures to reduce the cost of doing business in the country.
This was a step in the right direction to spur value addition and encourage reinvestment in the sector, Ms Muleya said. Ms Muleya explained that regionally, the company income tax in Zambia was on the higher end compared with Botswana where it was a flat rate of 22 per cent, making investment in Zambia less favourable.
“The increase in the exemption threshold PAYE is a welcome move as it increases citizen’s disposable income to spend on goods and services but the Government should be cautious on the demand-pull inflation that might arise from this measure,” she said.
Additionally, there were pronouncements which facilitate access to markets and infrastructure for Small and Medium Enterprises (SME’s). “The Minister of Finance, also spoke about a Zambia Credit Guarantee Scheme for SME’s, which will provide avenue for affordable financing for SME’s who are marginalised in accessing finance from traditional sources like the commercial banks,” Ms Muleya said. Furthermore, to reduce the cost of doing business for SME’s, Ms Muleya said the minister announced that Government had reduced licensing fees from K9, 000 to K4, 500.
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