A LUSAKA-based economist Chrispin Mphuka has urged the government to reduce the rate of debt contraction and increase taxes from mines for more revenues.
Dr Mphuka said Zambia was increasing public debt at a fast rate, hence the need for sustained economic growth to have sustainable debt.
He said this when he presented a paper on debt sustainability and a 2014 Budget reflection during the Economics Association of Zambia (EAZ) post-budget analysis breakfast meeting in Lusaka.
“We need sustained economic growth to have sustainable debt. Structural transformation must take place to ensure a more sustained growth,”
“So in the interim measures such as the 10 per cent export tax on copper concentrates are commendable as they encourage processing to ensure better prices.
“In my view copper blisters should equally be taxed. Only copper cathodes must not attract export tax,” Dr Mphuka said.
He it was important to tax the mines more instead of contracting more debts.
Dr Mphuka said between 2002 and 2008, revenue from mine tax was 0.56 per cent of Gross Domestic Product (GDP) while the mines’ total earnings were close to 10 per cent of GDP.
This he said was due to over-generous tax concessions, under declarations due to fraud and lack of capacity to monitor mining activities.
He said the only way forward in terms of resolving the problem was through revenue-based tax which he said was easier to administer and that it had stabilizers.
Dr Mphuka said the mines had over the years not paid enough in terms of taxes, hence the need for Government to consider coming up with revenue-based measures.
“Over the years mines have not paid enough and this has come not just from me, but the International Monetary Fund (IMF), World Bank at one time and even cooperating partners.
“ It is time that we sit down and see how we can tax the mines properly. And I believe the revenue-based tax is the best whether windfall or whatever, what is important is that revenue-based tax will be better in ensuring that mines declare accurate taxes,” he said.
Dr Mphuka said that debt sustainability also demands that contracting of debt was done in a consultative manner, saying that Parliament should have the final say on what debts the country should have.
He said such a measure should be put in place because Zambia’s middle income status meant less concessional borrowing and more private debt.
He said the contribution of the manufacturing sector to GDP and exports should also grow.
Dr Mphuka said Government’s policies should, however, be engineered at exporting processed goods.
“We cannot invest everywhere at the same time. So Government must
Govt should start spinning profits from state controlled or Private public partnership business and stop depending of taxes.
Instead of just being bloated vehicles of corruption, these state controlled entities cough *ZAMTEL* cough need to start turning a profit and contributing to national coffers.
Hey Doc, didn’t you hear? We are about to issue a Eurobond for about US$2.2 billion! Totally wondering what your ‘urging of the government’ is going to achieve…… these guys believe in a ‘non-debt-free’ Zambia.
Doc, even if the taxes on profits are increased to 90% we will still be in the same position because of transfer pricing. The owners of the mines sale minerals to their subsidiaries outside Zambia at less than market value if not cost. And so no tax for Zambia. Change and enforce the law/s then talk about tax increase. The investors at moment will complain to any tax increase for the sake of it.
DOc,you are wasting your time,they won’t listen!!
At times one can sense there are a few elements within PF who know what should be done. However, they know as well if the right thing is done, they wont benefit at a personal level, hence the position this country is in at the moment. The issues of price transfers, under declaring of revenue and other schemes are well known. But this govt is not ready to address any of these, since their tax, in form of corruption, is covered at the expense of the majority.
That is “Common Sense” but unfortunately though called “Common Sense”, you will notice it’s NOT Common, especially with the brand of politicians we have in Zambia, as they would rather line their own pockets, than make decisions that will benefit the nation.
That is “Common Sense”, but unfortunately though called”Common Sense”, you will notice it is NOT Common, especially with the brand of politicians we have in Zambia today, as they would rather line their own pockets, than make decisions that will benefit the nation.
In addition lets look at the the GDP potential vs real GDP equilibrium in the case of Zambia, looking at business cycles theories we have and enacting economic policies to grow the economy and also creating a robust financial system and other to retain value and insulate the economy .
Relooking at the: C+S+T=C+I+G+(X-M)
in its simple form will help us most in our fiscal and monetary policies therefore fostering the Kwacha to slowly gain interested and be traded as a “reserve currency”.Its simple but having a balance is what is helpful and growing it thereby reeducing the deficit and increasing in reserves and further consolidating sectors.its simple but having a balance.Lets balance…
Yes, they’ll listen. In fact, the investors will listening too. There is need for our people to raise arguments and push for a better and fairer share of our resources. All over the world, investors have no problem in keeping tax regulations, why should they fail to do so in Zambia?
Investors always make their money despite strict tax regulations in Europe, Asia or America. If our authorities make it clear to them that we also need to make our money as a nation, they will understand and comply.
Understanding the sectors of your economy and their contribution to above with your receipts and payments from previous fiscal yrs. and your debt portfolio this side, position you to balance the above in fiscal and monetary policies and steer to better growth.
its like having a thorough knowledge of your business its challenges and opportunities minimizing and maximizing to grow and creating wealth for your business where as looking at various departments and sectors of your business as it where with your finance man as custodian and counter parties as players to critically watch analyze and mitigate to ensure fair return to yourself in your business dealings leaving something for your peoples
If you are in deficit you look first within restructuring and trying to improve your balance sheet as it were without hating your business and its moral sense.
If not working within you look at healthy options with your leverage in mind and capital structure then access markets and assets to help you be a going concern that matches your risk and return objectives constantly rebalancing and positioning to ensure you obligate on your indentures but this should not be perpetual because it qualifies you to voluntary file for and leave something for yourself and those .lets reform our sectors therefore and create a ustainable cycle from which one value created in one sector cycles in all…
@ JonathanMhango Financial Analyst
You are toooo deeeep for the LT bloggers, please simplify. That equation…..hmmm. I vaguely recall it during Dr Kamya dreaded micro-economics classes at then UNZANDO!!!
…..Dr Kamya’s macro and micro economics classes, I think it was BS 210.
@ jonathan financial analyst. Remember that not everyone is an economist on this blog. If you cant put your analysis in simple and plain language for everyone or at least the majority to follow you, then most likely you don’t understand the subject that well your self. Imagine if engineers also start explain things using Differential Equations and diagrams.
I am afraid the financial analyst is full of it. Nothing he has said makes sense, and it’s full of meaningless buzzwords. The first clue that he doesn’t know what he is talking about is his utopic view that the Kwacha can be used as a reserve currency. This is currently so unrealistic no self respecting economist would suggest it as a means to end our budget deficit issues.
Let’s face it, we do not have a revenue problem. We have a spending problem. The PF Govt decided to increase civil servants’ salaries to unsustainable levels, while the size of Govt has also ballooned. 53% of the budget will be swallowed by salaries alone, and this is before we even talk of other operating expenses. At this rate, very little will be left for investment.
Every one should be able to understand that before he can start talking about policies.
A reserve currency is simply a summation of your economy and its policies.I simply said that to simply pull your leg but I think its something that our currency colleagues should be planning for the kwacha in the near longterm Naturally if your exports are quality and attractive then all those things will fall into place your exec rates inflation cost of living.A reserve currency is a mark of accomplishment elders and it simply speaks why hold and trade say a Congo.So you currency planners that is next for u to position the kwacha in the near long-term and indirectly balancing them all its a mark
That is why if the policy rate is being announced and inflation rates accordingly, very few people change and position and watch the kwacha unless the policies that be in the economy are towards establishing that accomplished mark, the currency. Looking at the equation, lets establish the kwacha as an accomplished mark of our economy not the rand or pula or dollar even locally.
Simply by checking the currency one need not look much to understand the strength of the economy .One you do that you then start talking about the exchange rate reshime not parried to any. Lets establish the kwacha and see it as a mark of our economy not the dollar and always inversely related to some currency
Gov. efforts and plans is seen to be in line and we can only give support and contribute positively
I am sure the government of late Mwanawasa is vindicated for having introduced windfall tax and would therefore urge His Excellence M. C. Sata to collect more from the mines and not contract huge debts. We are endowed with minerals that are suppose to pay most of our bills as a nation.