According to an investigation conducted by researchers […]

According to an investigation conducted by researchers at Zambia Center for Accountancy Studies (ZCAS) in 2025, it was revealed that 40.4% of Small and Medium Enterprises (SMEs) in Zambia are not registered for tax.

 These findings suggest that a significant number of businesses operating in Zambia are outside the formal tax structure, raising concerns over lost government revenue and growing fiscal pressure on the national budget.

Speaking in an interview with Zambian Business Times (ZBT), Copperbelt-based economist and policy analyst John Ng’andu described the findings as worrying for Zambia’s economic stability and long-term fiscal sustainability.

“The investigation that was done by ZCAS and the results showing that 40 percent of SMEs are not registered for tax is very sad for our country because the government depends heavily on taxes to finance the national budget,” said Ng’andu.

 He added that failure by SMEs to register and pay taxes reduces government income and increases the risk of wider budget deficits. “If SMEs are not registered, it means they are not paying taxes, and the revenue the government is supposed to collect will not be realized, which may push the national budget further into deficit,” said Ng’andu.

Meanwhile, a further check on the ZCAS investigation report by ZBT also revealed that 36.2 percent of SME owners cited lack of awareness about tax obligations as the main reason behind non-compliance. However, the research further showed that despite many businesses operating outside the system, about 86 percent of SME operators still acknowledge the importance of taxation in supporting national development.

 The economic analyst warned that low tax compliance among SMEs affects more than just government revenue collection because it also weakens funding towards critical sectors such as healthcare, infrastructure, and social protection programs.

“Once government revenue reduces, health facilities, infrastructure development, and other social protection services are affected, and this also affects productivity and growth among SMEs themselves,” said Ng’andu.

 He further argued that the current situation creates an unfair business environment where compliant companies are disadvantaged while unregistered businesses continue operating outside legal obligations. Ng’andu has since called for stronger systems and policies to help the government identify informal businesses, improve tax education, and recover lost revenue in order to strengthen Zambia’s fiscal position and support economic growth.

Article by Phillip Sinkala