Harnessing the power of electronic fiscal devices to increase VAT revenue in Zambia

  • Compliance by formal firms with consumption taxes such as Value Added Tax (VAT) remains low in Zambia.
  • Substantial VAT evasion happens at the point of retail sales, translating into lower VAT remittances to the treasury.
  • The Zambia Revenue Authority (ZRA) has implemented various policy tools targeted at this type of tax evasion. One key policy intervention was the rolling out of Electronic Fiscal Devices (EFDs) for VAT-registered firms.
  • EFDs, by themselves, may be insufficient to curb evasion. Consumer Incentive Schemes are a complementary policy that can help.
  • In this brief, we outline the findings from a survey of urban Zambian consumers on their experiences with EFDs, receipt requesting behaviour and price negotiating strategies.
  • We also outline key considerations that ought to be taken when designing a Consumer Incentive Scheme, which include: Awareness and trust of consumers; pay-out rates and frequency; seller responses to policy inventions; and pay-out modalities.
  • This work is part of a long-term collaboration between the IGC and ZRA to improve tax compliance in Zambia through experimental research.