Leakage or Low Base? E-Payment Systems and Revenue Collection in Zambia

Leakage or Low Base? E-Payment Systems and Revenue Collection in Zambia examines whether Zambia's revenue shortfalls are caused by a narrow tax base and inadequate rates, or by leakage within manual, cash-based collection systems. The study uses Lusaka City Council's 2026 e-Council rollout as a natural experiment. Following the migration of seven revenue services to digital collection, monthly revenue increased from approximately K61,000 in January 2026 to K13.9 million in June, without any change in statutory rates. This dramatic increase raises an important question: was the previous shortfall really a problem of low revenue capacity, or was revenue being lost before reaching the treasury? Drawing on government data, Auditor General reports, digital-government statistics, and research on e-payment adoption in Zambia and other African countries, the study develops a framework for distinguishing leakage recovery from genuine growth in the revenue base. It recognises that both problems can coexist and therefore should be assessed separately rather than assuming that low collections automatically justify higher rates. The central policy message is clear: governments should audit revenue collection and address leakage before increasing taxes, rates, or fees. Digital payment systems can reduce cash-handling risks, strengthen audit trails, improve transparency, and reveal the actual revenue potential of existing tax and fee structures. The study recommends that Zambia prioritise digitisation, leakage audits, enforcement of outstanding liabilities, and monitoring of post-digitisation revenue before introducing further rate increases. This approach can improve revenue mobilisation while protecting compliant taxpayers from carrying additional fiscal burdens created by weaknesses in collection systems. The study ultimately shifts the policy question from simply asking "How much more should taxpayers pay?" to a more fundamental question: "How much of the revenue already owed is actually reaching the treasury?"