Tax burden rises in K284.8bn budget

...with VAT, mobile money levies and duties on sugar and plastics set to rise as Government seeks K10.8 billion in additional revenue

By NATION REPORTER

GOVERNMENT has proposed sweeping increases in taxes and charges affecting consumers, businesses and higher-paid employees in a K284.8 billion Budget that earmarks K67.6 billion for debt servicing.

Presenting the 2027 Budget in Parliament yesterday, Finance and National Planning Minister Dr Situmbeko Musokotwane proposed increasing Value Added Tax (VAT) from 16 percent to 16.5 percent, raising mobile money levies across all bands and introducing new duties on sugar, chocolate and plastic bottles.

The revenue measures, expected to yield an additional K10.8 billion, are proposed to take effect on January 1, 2027.

The VAT increase of half a percentage point would raise the tax charged on goods and services subject to the standard rate. Alongside new product duties and higher transaction levies, it could add to household expenses and business costs where suppliers pass the increases to customers.

Dr Musokotwane proposed excise duty of K1 per kilogram on sugar and 20 percent on chocolate and sugar confectionery. Mobile money levies would increase across all bands, although the speech does not specify the proposed amounts.

Higher-paid employees would face a new top marginal Pay-As-You-Earn rate of 39.5 percent. In the main address, the minister said this would apply only to the portion of monthly income exceeding K37,000.

"Only the additional income above K37,000 per month will be taxed at 39.5 percent," Dr Musokotwane said.

However, the annex gives the threshold as K34,000, creating a discrepancy requiring clarification before taxpayers can establish the precise implications.

There is a similar inconsistency over company taxation. The main address proposes increasing corporate income tax rates by five percentage points on income currently taxed at 20 percent or below. The annex describes a broader increase covering income taxed below the standard 30 percent company rate.

Government also proposes introducing 15 percent withholding tax on dividends paid by mining companies, up from zero, which Dr Musokotwane said would align their treatment with that of companies in other sectors.

Environmental measures include doubling excise duty on single-use plastics from 100 percent to 200 percent, introducing an 80-ngwee duty per plastic bottle and raising excise duty on selected plastic articles from 15 percent to 30 percent.

The measures could affect packaging and bottled-product costs, depending on how businesses absorb or pass on the additional taxes.

Government further proposes withdrawing customs duty exemptions and VAT zero-rating on energy-saving appliances.

Selected passport, civil registration and mining-related fees would also rise. The annex additionally lists increases in several immigration permit charges, including employment, residence and investor permits.

To protect local production, Government proposes raising customs duty on imported ceramic tiles to 40 percent and introducing a 20 percent surtax on selected aluminium imports alongside higher customs duty.

Selected imported processed meat products would attract a 30 percent surtax, up from 20 percent, while crude soya bean and sunflower oils would face 15 percent customs duty and a 10 percent surtax.