“Zambia, like most developing countries, has undertaken tax reforms in a bid to raise more revenue from its tax system. Though tax reforms in Zambia began in the early 1990s, tax revenue has grown only marginally from its sharp decline prior to the reforms. Measured by the Tax-to-GDP ratio, revenue performance has ranged between 15% and 20% of GDP (Gross Domestic Product). This paper attempts to establish whether significant scope exists for informal sector taxation in Zambia. It reviews the methods available for measuring informality and compares the results these methods have achieved in different contexts. Applying the Currency Demand Approach to Zambia for the period 1973–2010, it finds that informal GDP averaged 47.7% of official GDP per annum and that the informal sector’s tax potential averaged 42% of total tax revenues per annum.”
