ZAMBIA Association of Manufacturers (ZAM) president Ashu Sagar has raised the alarm over the government’s proposed mid-year increase in sin taxes, cautioning that the move could unintentionally reverse recent economic gains by spurring smuggling and illicit trade. Speaking during an interview on Hot FM on Thursday, Sagar expressed concern that manufacturers, particularly in the alcohol and tobacco sectors, would struggle to remain competitive and compliant under the new tax regime.
Sagar explained that while the reduction in fuel prices and a stabilised exchange rate have offered a promising economic outlook for the manufacturing industry, these gains may be rendered ineffective if the government proceeds with implementing additional taxes, especially those targeting cigarettes, spirits, and beer.
“There are various taxes in terms of what government is trying to implement. A lot of them are poised towards the manufacturing industry,” he said. “When you look at sin taxes such as cigarettes, spirits, beer, these taxes are specific to our industry. When you look at five of the taxes, with just two or three directly aimed at alcohol and tobacco, the cost pressure becomes disproportionately heavy.”
The ZAM president noted that these additional financial burdens could significantly weaken the industry’s ability to pass on cost savings to consumers, a factor that is vital in maintaining market stability and consumer demand. More worryingly, Sagar pointed out, the taxes could inadvertently incentivise cross-border smuggling and an uptick in illicit trade — both of which threaten legitimate businesses and rob the government of tax revenue.
“Once you raise taxes mid-year without adequate consultation or transition time, you risk creating loopholes for illegal trade. This undermines law-abiding manufacturers and ultimately reduces the tax base rather than enhancing it,” he warned.
Sagar urged the government to take a more holistic and consultative approach before implementing such significant fiscal measures, advocating for collaboration between policymakers and industry stakeholders to ensure reforms are sustainable and growth-oriented.
He concluded by reaffirming the manufacturing sector’s commitment to working with government but emphasised that stability, predictability, and fairness in policy implementation are key to building a resilient local economy.
The proposed sin tax hikes come at a time when Zambia is striving to attract investment, stimulate local production, and increase exports. Analysts say striking the right balance between public health policy, revenue generation, and economic growth remains a delicate but essential task.