Revenue for Growth Activity FY 2021 Annual Report

The Activity engages government and non-government stakeholders to build capacity in tax policy analysis, improve tax compliance and administration, and strengthen the tax culture in a manner that facilitates private sector growth and relationships between taxpayers and the GRZ. The R4G project supports four objectives to help Zambia strengthen its tax culture, increase voluntary compliance, and sustainably increase domestic revenue in a manner that promotes balanced private sector-led economic growth. The objectives include: improving tax and non-tax revenue administration and compliance, strengthening tax policy, enhancing public-private dialogue, and enhancing capacity to address emerging fiscal policy and management priorities. The project employs various tools to accomplish these objectives, including Political Economy Analysis (PEA), Rapid Benchmarking of Tax System Performance (RBTSP), Grants Under Contract (GUC), and Gender, Equality and Social Inclusion (GESI) Analysis. These tools aim to identify incentives and disincentives affecting public and private sectors concerning tax policy and fiscal reform, obtain a clear understanding of the Zambian tax system, support research and advocacy initiatives, and identify any GESI biases in the tax system. When the R4G project was awarded in June 2021, Zambia faced dueling crises, struggling with unprecedented debt distress and severe economic shocks caused by the COVID-19 pandemic. The GRZ will need to significantly increase efficiency and compliance in tax collections while rebuilding a tax culture that productively engages the private sector in formulating more equitable and broad-based tax policy initiatives. Despite these challenges, there is a renewed sense of hope and optimism in Zambia following the election of President Hakainde Hichilema in August 2021. The President's Manifesto and subsequent speeches have provided a broad outline of his economic agenda, which is expected to be detailed in the coming months. The R4G project aims to support the GRZ in implementing these economic reforms and improving the country's tax culture and revenue mobilization. The R4G project has made significant progress in its first year, with various technical assistance activities and key administrative activities implemented to support the GRZ in achieving its objectives. These activities include providing technical assistance to the Zambian Revenue Authority (ZRA) to operationalize Ministry of Finance (MOF) policies and collect tax and non-tax revenues in a more effective, efficient, and transparent manner. The project has also conducted a Rapid Political Economy Analysis (PEA) to identify incentives and disincentives affecting public and private sectors concerning tax policy and fiscal reform in the political environment. Additionally, the project has conducted a Rapid Benchmarking of Tax System Performance (RBTSP) to obtain a clear understanding of the Zambian tax system and identify areas where the GRZ needs support to increase revenue and voluntary compliance. The R4G project has also supported research and advocacy initiatives of local private sector associations and civil society organizations through Grants Under Contract (GUC). Furthermore, the project has conducted a Gender, Equality and Social Inclusion (GESI) Analysis to identify any GESI biases in the tax system and determine how the project can work with the GRZ and civil society to mitigate them. Overall, the R4G project has made significant progress in its first year, with various technical assistance activities and key administrative activities implemented to support the GRZ in achieving its objectives. The project aims to continue supporting the GRZ in implementing economic reforms and improving the country's tax culture and revenue mobilization in the coming years.