DIRECTIVE BY PRESIDENT LUNGU REGARDING THE NEW MINING TAXES
We note the directive by President Edgar Lungu to the Minister of Finance and Minister of Mines regarding the regulations passed in the 2015 budget increasing mineral royalty tax rates from 6 per cent to 20 percent on open pit mines and 12 percent on underground mines. While we welcome the President’s stated commitment to more dialogue and stakeholder consultation, there are some difficulties that arise and will need to be carefully considered as we move forward at this time of high economic uncertainty and hardship.
As a starting point, a key lesson is to never undermine the importance of stakeholder consultation or to merely give it lip service. The budget proposals on the new royalty rates were introduced by the PF itself and no one else. They should therefore have consulted stakeholders before they presented and defended their proposals to Parliament. The fact that this was not done – as is evident from the President’s directive, reflects a concern about how the process going forward will unfold. Will we again hear that the Ministers have been directed to have more stakeholder concultations when things do not turn out as planned? We therefore urge the Ministers to be as wide in their consultations as possible and not limit their dscussions to the mining companies. NGO’s, political parties, ordinary citizens and individuals with expertise in these areas should also be engaged without making the process too long or protracted.
Secondly, most Zambians are acutely aware of the limited room for manoeuver that has been brought on by the excessive expenditure of the current administration which has contributed to the delayed implementation of development projects and non-payment of many government obligations. The budget was presented in anticipation of the mineral royalty taxes being levied at the new rates and if as a result of consultations, these rates are to be adjusted downwards or payments based on them are to be deferred, the government must explain how they will plug the resulting revenue gap. They must clearly explain how they will carry out the expenditure side of the budget without the anticipated revenue. As NAREP, we believe there are ways to resolve this matter and have always been willing to promote an approach that benefits the nation.
Thirdly, a regular meeting with industry leaders from the private sector should be held regularly with the President with a view to finding solutions to the bottlenecks being experienced by the private sector. The biggest single contributor to government revenue is PAYE. The bulk of this is generated from companies in the private sector and probably from less than 600,000 individual citizens and residents (out of a polulation of nearly 15 million). PAYE delivers even more revenue than mineral royalty and company taxes. It is patently unfair and unjust to keep criminally taxing the few Zambians that are fortunate to have a paid formal job with earnings above the tax threshold just to have the same money being recklessly applied. Spending over Kw11 million on each of the 18 by elections (as well as local government elections) that have been undertaken since October 2011 is something that any self-respecting administration would not feel proud of. The fact that some of these by-elections were as a result of defections promoted by the PF itself calls into question whether they proiritise the nation over their political survival or the other way round.
Finally, we believe that government must take bold steps to reassure the nation and the local and foreign investor community that they mean business and are determined to run our economy prudently. Continuous trips abroad to speak at forums and sign cooperation agreements are not the tricks that will dig us out of our economic mess. Controlling unnecessary expenditure, hitting the ground in Zambia to meet with and listen carefully to local stakeholders and reforming our tax collection system are some of the steps that need to be taken instead. We have all that it takes to make our country prosperous. That has never been the issue. The key to unlocking our problems has always been leadership. President Lungu must rise up to this responsibility sooner rather than later, for the sake of Zambia.
Elias C. Chipimo, Jnr.
National Restoration Party (NAREP)