K7.5M PENSION VAT ANOMALY UNEARTHED

MORE than K7.5 million is believed to have irregularly been deducted as value-added tax (VAT) from terminal benefits for 3,525 former Government employees under Voluntary Separation Association of Zambia (VSAZ).
The Ministry of Justice is said to have paid more than K7.5 million VAT which is not payable on emoluments, through Lukona Chambers of Nelly Mutti.
According to affidavits filed in the Lusaka High Court by VSAZ, although the money was deducted, retirees have learnt that it was never taken to Zambia Revenue Authority (ZRA).
The deduction was made between 2009 and this year when it was discovered that subtractions were illegal.
The ex-Government employees were informed that up to 16 per cent of their total terminal benefits were deducted as VAT. But ZRA says it is not mandated to collect VAT on emoluments and did not receive such money.
ZRA recently rejected a K620, 000 cheque from Rabson Malipenga who are retirees’ new lawyers who wanted to pay  VAT, in compliance with the old trend by the previous lawyers.
Justice Permanent Secretary Joseph Akafumba said in an interview that the retirees needed to pursue their refunds from their lawyers who received the money.
“As far as we are concerned, the money was released through their lawyers and whether they were remitting to ZRA or not is none of our business, we did not retain any Ngwee,” Mr Akafumba said.
“Initially, the ministry would issue two cheques both in the name of their lawyer – one would be for retirees and the other one was to be taken to ZRA as VAT.
“But we have realised that there is no VAT on terminal benefits and their lawyers should tell them where they were taking the second cheque.”
Mr Akafumba said both the ministry and the retirees did not know that the money was not remitted to ZRA because they were not aware that VAT was not deducted from terminal benefits.
The former workers have since sued the Government through the Attorney General for releasing the money and the ZRA for allegedly collecting the amount in form of tax.
However, the authority has filed an affidavit in opposition stating that it could not be joined as defendants in the case between the retirees and the Government because it did not receive the money.
“Although the plaintiff (VSAZ) claim that the payments received by the said Messrs Lukona Chambers were inclusive of VAT charged at 16 per cent, I do not believe that the payments could have been remitted to ZRA on account of the fact that VAT is not payable on income received,” stated Richard Kapasa, a senior tax inspector at ZRA in his affidavit.
The ex-employees have also complained to the Director of Public Prosecutions (DPP) on the failure to recover the money.
In a letter dated July 11, 2014 and signed by VSAZ general secretary Syachoke Simemeza and chairperson Shadreck Makulu, the organisation expressed sadness that lawyers at the ministry could not detect the fraud.
“Sir, in this matter we ask you that Anti-money Laundering Unit, Drug Enforcement Commission and the Anti-Corruption Commission look into this matter with the urgency it deserves, otherwise we shall seek the 
intervention of the President,” stated the letter.

Times of Zambia