Maravi

‘Zambians expect budget that will bring hope’

COMMENT - Workers in Zambia pay almost 3 times more tax than corporations do? And they wonder why people are poor.

‘Zambians expect budget that will bring hope’
Written by Kabanda Chulu
Friday, October 09, 2009 1:11:05 AM

IN VIEW of the global financial and economic crisis that has resulted in negative impacts such as closure of companies leading to job losses and reduced incomes, many Zambians today expect finance minister Situmbeko Musokotwane to present the 2010 national budget that will bring hope for serious economic recovery. Against this background, Zambians expect Dr Musokotwane to also lower taxes in order to stimulate economic growth and increase the buying power for many people.

However, this might not be the case because revenue estimates for next year indicate that income taxes are likely to be raised more from pay as you earn (PAYE) than Company Income tax, a situation that reflects the traditional reliance on the formal sector for tax revenues.

Total revenue expected from various income taxes is above K5 trillion with PAYE's contribution expected to be about K3 trillion.

According to the 2010-2012 green paper and medium-term expenditure framework (MTEF), which is used as basis for the national budget, in 2009 the government targeted to collect K2.8 trillion through PAYE, against K 1.1 trillion from Company tax.

But for 2010, PAYE is estimated to account for over K3 trillion while Company Income Tax is likely to be slightly above the 2009 figure of K1.1 trillion.

Nevertheless, some financial market experts have observed that targeting PAYE as a major contributor to income taxes normally indicates that there would be job creation, which looks unlikely in the short to medium term.

Other experts state that in a recession, a sensitive government should lower taxes to stimulate economic growth, encourage consumption and reduce tax evasion, thereby collecting more taxes.

It is projected in the green paper, that in 2010 the government would collect over K60 billion from the informal sector against the K39.8 billion that was targeted in 2009.

The government is also expecting to collect over K240 billion in 2010 from mineral royalties as compared to K214 billion that was targeted in 2009.

On other key revenues, the government is projecting to raise about K3 trillion from both domestic and import Value Added Tax (VAT), this is against the K2.5 trillion that was targeted last year and on fuel levy, the government expects to raise K300 billion from the 2009 target of K238 billion while medical levy is expected to contribute K 12 billion against K11.7 billion that was targeted last year.

On estimates for expenditure, in 2009, the Electoral Commission of Zambia (ECZ) got K41.6 billion but in the 2010 budget, the allocation might increase to above K120 billion due to delimitation and voters' exercise that had been planned to take place next year.

Other expenditure estimates include the K1.3 trillion for Ministry of Defence against K1.067 allocation of 2009, while the green paper stated that the agriculture ministry's allocation would reduce from K1.074 trillion in 2009 to about K800 billion in 2010 and the newly created Ministry of Livestock and Fisheries would be allocated about K250 billion.

Dr Musokotwane is expected to present the 2010 budget which is projected to be over K16 trillion [about 22 per cent of GDP] with the government making projections to have a total revenue of K12.25 trillion while GDP is projected to stand at over K70.82 trillion.

Looking at the ongoing economic challenges, Zambians expect Dr Musokotwane to announce a budget that would ignore the immediate short term needs of government administrative structures and allocate huge resources towards important social investments in health and education and capital projects such as road networks.

The government is also expected to reactivate industries by supporting tax levels that help create jobs.

It is expected that all expenditure that gobble resources without any meaningful returns would be stopped, although the weakness about the Zambian national budget is government's failure to stick to expenditure priorities and allocating huge sums of money towards activities that have no real return.

Labels: SITUMBEKO MUSOKOTWANE

posted by MrK @ 12:12 AM