WVAT Suspension No Solution

Traders Still Suffer, CSPR Pushes for Inclusive, Transparent Tax Reforms

System Lacks Reach and Risks Excluding Informal Traders

By Francis Maingaila

Lusaka, Zambia – (July 21, 2025)  - The Civil Society for Poverty Reduction (CSPR) has welcomed the Zambia Revenue Authority’s (ZRA) suspension of the Withholding Value Added Tax (WVAT) mechanism but insists the move is not enough to address deeper issues in the tax system. 

CSPR says the mechanism should be scrapped entirely, as it failed to protect traders and proved ineffective in improving compliance.

Effective August 1, 2025, ZRA will suspend the WVAT system following the rollout of the Smart Invoicing System, which it says is increasing transparency and efficiency in VAT collection. 

But CSPR Executive Director Isabel Mutembo Mukelabai argues that the WVAT mechanism created unnecessary burdens on traders while falling short of its objectives.

“Delays in VAT remittances by appointed agents led to penalties for traders, even when they were not responsible,” Mukelabai said.

 “In many cases, traders had to pursue agents or file on their own to avoid tax penalties, disrupting their operations.”

CSPR contends that the WVAT system’s physical structure, relying on intermediaries and manual processes, opened the door for inefficiency and compromise. The organization believes it should be completely decommissioned, not merely suspended.

While supporting ZRA’s adoption of digital tools like Smart Invoicing, Mukelabai warned that these systems are not yet inclusive.

 Many small-scale and informal traders still operate outside the tax net and lack access to the technology or training needed to comply.

“In areas like Kamwala, goods are often sold without invoices unless the buyer demands one,” she said. “Without enforcement and education, noncompliance will persist.”

CSPR noted that similar systems in other countries have struggled to include small traders due to high internet costs, poor connectivity, and limited digital literacy. 

In Zambia, these factors risk excluding informal businesses and rural traders, raising concerns about fairness and competitiveness.

Mukelabai emphasized that real reform requires more than technology. Without shared data systems across regulatory agencies and proactive enforcement, tax evasion and manipulation will continue. 

CSPR is urging ZRA to collaborate with other institutions to improve traceability from manufacturing to sale and ensure all goods are properly recorded.

“Modernizing tax systems must go hand-in-hand with education, infrastructure investment, and policy clarity,” Mukelabai said. “Suspending WVAT is a step—but not the solution.”

CSPR reaffirmed its commitment to working with ZRA, the Ministry of Finance, and other stakeholders to ensure that tax reforms support equity, transparency, and domestic revenue growth without harming small businesses.