Tax the Economy Better, Not More: The Test for Zambia’s 2027–2031 Revenue Strategy

By Kelvin Chisanga | The Zambian Economist Analyst | Thursday, 3 September 2026

Zambia enters the 2027–2031 Medium-Term Revenue Strategy with the tax take already at a record share of national income. The test of the final document is whether it grows revenue by widening the base and formalising the economy, rather than by raising rates on the same narrow formal sector.

Zambia’s revenue problem is not the size of the tax take. It is the narrowness of the base that produces it. That is the question the 2027–2031 Medium-Term Revenue Strategy must answer as consultations opened at Mulungushi International Conference Centre in Lusaka on Thursday, 3 September 2026: how to mobilise more domestic revenue for national development without undermining investment, production, jobs and household incomes.

The Ministry of Finance and National Planning is leading the process with the Budget Office and the Zambia Revenue Authority, with Secretary to the Treasury Felix Nkulukusa delivering the keynote under the theme “Mobilising Domestic Resources for Sustainable Growth and National Development.” The commitment to write the strategy was made in the 2026 Budget Address. It arrives at a moment when domestic revenue already finances 81.6% of the national Budget, which is why the Treasury’s domestic financing push carries so much weight.

A record take, and a heavy load

The Zambia Revenue Authority collected K160.6 billion in net revenue in 2025. Measured against the GDP figures the Zambia Statistics Agency published for that year, it comes to 22.1% of national income, the highest ratio the country has recorded. The target for 2026 is K185 billion, about 20% of a projected K923.7 billion economy.

ZRA’s share of the national revenue envelope has climbed from 55.7% in 2020 to a planned 73.1% in 2026 as donor funding has shrunk. The state now leans on the tax net for nearly three kwacha in every four it spends. A strategy written against that backdrop has to deliver, because the alternatives are borrowing or cutting services.

The money already in the room

A tax system that collects a fifth of GDP while leaving close to half of what the law expects uncollected is leaving money in the room. Audit-based research by the Zambia Revenue Authority and the United Nations University’s World Institute for Development Economics Research, which fed into the 2026 Budget, puts the total compliance gap at between 47 and 56%. The gap is driven mainly by corporate income tax misreporting, and corporate income tax alone is worth about K9.7 billion in recoverable revenue.

Closing part of that gap collects more than most rate rises would, and it does so without touching a single payslip or shelf price. The instruments are already in service: risk-based audits, data matching and the Smart Invoice system, which since January has tied one firm’s compliance to its customers’ input VAT position. The strategy’s job is to scale these tools and to publish the score.

Targets the public can hold the Treasury to

A strategy without targets is a speech. The document that comes out of these consultations should commit Government to clear annual and five-year measures: domestic revenue as a share of GDP, growth in registered taxpayers, compliance rates by tax head, a falling tax gap, and collection from sectors that are demonstrably under-taxed. Each should be published and monitored, so that progress, or its absence, is visible to everyone who pays.

Formalisation belongs on the same scoreboard. About 76% of Zambia’s workforce operates in informal employment, according to the 2023 Labour Force Survey. Programmes that graduate micro and small enterprises into the formal economy do more for the revenue base over five years than any single-year rate adjustment, because a formalised firm files returns, employs on the books and becomes visible to lenders.

What the exemptions budget buys

Every incentive and exemption has a price, and the country rarely sees the receipt. The strategy should order a review of tax expenditures against one question: for each kwacha forgone, what investment, jobs, exports and productivity came back? Incentives that cannot show results should be retired. Those that can should be kept, and their cost published annually. This is not hostility to investment. It is investment discipline, and serious investors respect a state that knows what its generosity costs.

Mining: a fair share without whiplash

Mining taxation needs the surest touch in the whole document. Zambia must secure a fair share of its mineral wealth while keeping the regime predictable enough to hold the investment pipeline now running through Vedanta’s Konkola mine and First Quantum’s Kansanshi and Sentinel expansions. The sector has absorbed enough regime changes to price instability into every new decision. A transparent, formula-driven regime held steady across the five years will raise more revenue than a squeeze in any single year that capital answers by slowing down.

Where over-taxation backfires

Households and the private sector set the ceiling on what tax policy can achieve. Raise the cost of formality, on paper or in practice, and activity migrates to where the tax authority cannot follow. For a small firm, the burden is rarely the headline rate alone; it is filing time, compliance costs and refunds that arrive late. Every measure in this strategy should carry a simple formality test: does this make staying formal more attractive, or less?

The cycle the strategy should build

My principle is simple: tax the economy better, not simply tax the economy more. The revenue strategy should engineer a cycle in which investment raises production, production creates jobs, jobs lift household incomes, incomes broaden the tax base, and a broader base delivers the domestic revenue that funds the next round of investment. Debt restructuring has already eased what taxes pay for, as our reporting on the Treasury’s fiscal space showed. The MTRS decides what they pay for next.

The goal is not to extract more from a small economy. It is to build a larger, more productive economy that generates more revenue by default. The consultations that opened on Thursday will be judged in 2031 on one distinction: whether the base grew, or merely the rates.

Related reading

• Zambia to Launch 2027–2031 Revenue Strategy Consultations on Thursday
• The Four Pillars of Zambia’s Revenue Strategy, and the Gap They Have to Close
• Budget 2027 Should Put Jobs and Productive Investment First
• Zambia Domestic Financing 2026: Treasury Targets 82% of National Budget
• From K70 to K15: How Debt Restructuring Changed What Zambia’s Taxes Pay For
• ZRA Smart Invoice: Why Your Supplier’s Compliance Is Now Your Problem
• Mapping the Copper FDI Pipeline: Vedanta, Mopani and First Quantum’s Zambian Bets
• Zambia MSME Enterprise Graduation Scheme
• The Mathematical Derivative of the Torah: A Zambian Tax Philosophy

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