By Anthony Bwalya – UPND Member
Now more than ever, the United Party for National Development (UPND), in keeping with one of our fundamental founding principles – that of putting people back at the heart of economic growth and development; is committing to delivering a mamoth $1.5bn back into the economy by merely rearranging the tax models around Pay As you Earn (PAYE) and other SMEs business incentives.
With our economy currently dead in the trenches, suffocated by the culture of reckless borrowing and public spending by the Patriotic Front (PF) administration; as well as any prospects of recovery being thwarted by what is now government’s evidently diminished headroom to spend, the UPND would like to reiterate our unwavering resolve to deliver a well coordinated tax reform plan intended to reignite growth, and deliver opportunities for ordinary citizens to once again be able to take advantage of available opportunities in our country to not only spend, but also build SMEs and create jobs for the economy.
Part of our wider tax reform plan, is anchored on delivering additional tax relief for individuals; while giving unprecedented growth and capital protection incentives to SMEs; and this is envisaged to directly deliver well in excess of $1.5bn worth of a boost to the economy at a very basic, micro economic level, over a 5 year period.
HOW WOULD THIS PLAN WORK?
As a matter of economic common sense, $1bn is worth more to an economy when directly placed in the hands of micro economic actors (individuals, households and SMEs) than it being held, and dispensed with, by a corrupt, unconscionable government.
In fact, $1.5bn in the hands of the PF would see an enormous 63 Cents on every $1 lost to corruption at the hands of political actors and their private sector proxies.
$1.5bn in the hands of individual, households and SMEs will go substantively towards spending on things that matter most to our citizens – health, education, building and expanding small businesses and actually creating the jobs the PF government have failed to create in close to 10 years of tinkering at the highest level of politics.
The $1.5bn would see the cab drivers and bus drivers more than double their takings as people’s ability to spend on essential travel expands. We also expect our mothers selling Kapenta, vegetables and tomatoes increase their sales; as would our brothers selling electronic gadgets – as individuals and households get to have a bit more disposable income to dispense with.
This is why we have proposed to increase the lower tax exempt threshold by an extra K700, from the current K3,300 to K4,000; as well as proposing to cut the upper tax bracket by a massive 10%.
Now, as people spend more within the economy, we anticipate government stands to collect up to 30% more in consumption based taxes, as opposed to the current situation where micro economic spending is subdued owing to over taxation, and government failing to maximize the collection of consumption based taxes.
It is worth noting, that any part of the $1.5bn which consumers end up not spending or investing in SMEs business activities, will most likely end up as savings in our local banking jurisdiction or informal saving groups. Either way, it would have the net effect of driving interest rates down and therefore lowering the overall cost of money within the economy.
And as far as SMEs go, the UPND is disappointed that the PF have relentlessly been sacrificing and punishing SMEs by failing to deliver crucial business incentives to allow our SMEs protect the integrity of their capital and then proceed to growing their SMEs enterprises.
The PF administration have in close to 10 years of being in power, failed to deliver capital incentives for SMEs; as well as failing to deliver incentives for growth of these indispensable micro economic actors.
The UPND plans to deliver tax and other business incentives to allow SMEs achieve Two (2) things:
1. Protect the integrity of capital
2. Achieve business expansion without being penalized for doing so
This could mean the following:
1. Graduation of tax and other business levy obligations over a period of 5 years, with 0% obligations in year 1 of setting up and the final 100% of tax and other business levies due only applicable in year 5. This will allow SMEs a smooth path to growth and expansion.
2. Incentivize business expansion by ensuring that new business branches are not penalized on the performance of principal branches. This will encourage more SMEs to expand their reach and the process create more employment.
The following measures are also envisaged to prop up compliance in terms of tax and other business levies. This is one sure way of expanding our ever degenerating tax base.
IS THIS PLAN POSSIBLE?
Since 2011 to date, Zambia has leaked close to $10bn in a combination of state sponsored corruption where PF officials and operatives abuse public processes to steal public resources. We have seen this from successive FIC reports, Auditor General’s Reports and CPI intimations, with Zambia having dropped several points on the assessment register.
We have also seen how the Ministry of Lands and Natural Resources diverted close to $100m of Mukula revenue into their own pockets, the undelivered but overpriced ambulances, the Fire Tenders…
We also know that on the Copperbelt province alone, government pays over 40,000 ghost workers per month. Expanding this statistic across our 10 provinces may mean that under the PF, the country is losing tens of millions of dollars paying salaries and other fringe benefits to over 100,000 ghost employees.
Therefore, with the right kind of political leadeship, it is possible for us to achieve crucial efficiencies around how our government works: and with that would come several millions of dollars in expenditure savings, money that can easily be channeled towards funding our $1.5bn tax reform plans.
We would like to reiterate, that our planned $1.5bn micro economic boost, staggered over a period of 5 years and anchored on robust reforms to part of our tax system, will be executed while a UPND administration continues to mobilize the much needed resources to invest in priority infrastructure as part of continuing to create an enabling environment in which micro economic actors can dispense with the $1bn cash injection.
This is what a responsible government should and could have done.
This is what a UPND GOVERNMENT plans to deliver.