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Tax expenditures country report: Zambia

Mwale, Evaristo
Book Publications (2025)

German Institute of Development and Sustainability (IDOS)/Council on Economic Policies (CEP)

DOI: https://doi.org/10.23661/cr10.2025

The 2023 Tax Expenditures Report, published by the Ministry of Finance and National Planning, estimates that Zambia forfeited revenue equivalent to 1.5 percent of GDP, representing 7.5 percent of total taxes and levies collected in the year. It is important to note that this figure excludes Value Added Tax (VAT)-related tax expenditures, which, according to the Global Tax Expenditures Database (GTED), are a substantial source of revenue forgone. Tax expenditures in Zambia are delivered through a variety of mechanisms, including reduced rates, exemptions, and suspensions, applied across both domestic and trade-based taxes.

Transparency: Zambia published its first tax expenditure report, covering fiscal years 2022 and 2023, in December 2024, a milestone toward improving fiscal transparency. To build on this progress, while reinforcing the legal requirement for timely disclosure under the Public Finance Management Act of 2018, Zambia should institutionalise mandatory annual reporting on the cost and effectiveness of tax expenditures, thereby strengthening continuity and public accountability and ensuring this is not a once-off effort.

Complex landscape: Over the years, Zambia has adopted a range of tax incentives through rate adjustments, exemptions, and deferrals—to encourage investment, promote industrial growth, and stimulate trade. These policy tools reflect the government’s broader commitment to using the tax system as a lever for achieving inclusive and sustainable development. However, while these measures serve noble goals, they also add complexity by introducing different rates, exemptions, and rules that make the system harder for taxpayers to navigate.

Evaluation challenges: The absence of a comprehensive evaluation framework requiring regular assessments limits systematic review of TEs. With only one tax expenditure report produced to date, limited historical data also restricts possible evaluations of the economic and fiscal impact of tax incentives. This undermines the ability to determine whether current tax expenditures are achieving their intended policy objectives.

Fiscal sustainability: The fiscal cost of tax expenditures, coupled with Zambia’s mounting debt obligations, pose risks to fiscal sustainability. Without careful monitoring and rationalisation, tax expenditures could erode the domestic revenue base, compromising the country’s ability to meet its development goals.

Policy recommendations:

• Mandate and institutionalise the annual publication of a comprehensive Tax Expenditure Report as part of the National Budget process to support evidence-based policy and fiscal accountability.

• Publish comprehensive reports by December 31 each year, in time to inform the national budget.

• Include detailed disclosures on the scope, legal basis, objectives, and outcomes of each tax expenditure to enable performance evaluation and policy refinement.

• Establish an inter-agency working group (including Zambia Revenue Authority (ZRA), MoFNP, and Zambia Development Agency (ZDA)) to coordinate the identification, recording, and review of TEs.

• Subject major tax expenditure provisions to periodic cost-benefit analysis to assess their effectiveness and fiscal trade-offs.

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