Saturday, October 09, 2010

EAZ urges govt to re-visit windfall taxes

EAZ urges govt to re-visit windfall taxes
By Fridah Zinyama
Sat 09 Oct. 2010, 13:50 CAT

ECONOMICS Association of Zambia (EAZ) president Noel Nkoma has urged government to re-visit the issue of windfall taxes, saying government is losing out on revenue collection from the mining sector through the lack of re-introduction of this tax regime.

Copper has now reached a high of $8,285 per metric tonne, the highest level since the beginning of this year.

The high copper prices have again spiked the debate on whether government should re-introduce the windfall so that the country could benefit from the high prices of the red metal on the international market.

Commenting on the 2011 national budget presented to Parliament by finance minister Dr Situmbeko Musokotwane on Friday under the theme ‘A people’s budget, from a people’s government”, Nkoma said government had made no mention on whether they would re-introduce the windfall, an omission which was very costly to the country.

“Government should have just mentioned even the intention to resolve the windfall tax issue but they have remained silent over this very important issue,” he said. “It’s not too late to make amends on the windfall tax now that prices are high again.”

On the K43 billion which has been allocated to the Ministry of Agriculture for irrigation, Nkoma said the amount was not enough to adequately deal with the issues which might arise due to the effects of climate change.

“With the way the weather pattern has been changing, it is important for government to take issues of improving the irrigation system in the country so that we can reduce dependence on rain for crop production,” he said. “We should not take the bumper harvest that we have produced this year for granted, the weather can change and therefore affect maize production for the coming years.”

Nkoma said it was therefore important that government increased the allocation to irrigation so that the country reduced its dependence on rain for crop production.

On the reduction on budget support from the donor community from 14.5 per cent to 7.7 per cent, Nkoma said it was a welcome move which showed that the country’s economy is growing hence its ability to look after itself was improving as well.

On the budgetary allocation of K12.8 billion to the Ministry of Tourism for marketing Zambia’s tourism sites, Nkoma said the amount should have been increased to deal with issues of re-stocking of game in the national parks.

“Government has allocated enough funds for the building of roads and bridges in next year’s budget, will lead to an increase in tourists coming to visits Zambia,” he observed. “But the problem is that there is not enough game in the national parks across the country hence the need for money to re-stock.”

Nkoma said government was shooting itself in the foot by not allocating enough funds to deal with game re-stocking in next year’s budget.

And Millers Association of Zambia (MAZ) chairman Peter Cottan has expressed happiness with government’s decision to increase the PAYE exempt threshold by 25 per cent from K800, 000 to K1 million per month.

Cottan said the increased PAYE exempt threshold would put more disposable income in people’s pockets.

[Not necessarily. The reduction of PAYE is pretty much offset by the borrowing of $500 million, which is a burden on the Kwacha and results in worse exchange rate, which means higher prices for imported goods in the shops. The government sees a reduction in donor funds, and their answer is: let's borrow half a billion US dollars. - MrK]


“By taking so many workers out of the tax bracket, more people will have disposable income in their pockets to spend on the other things,” said Cottan.

In next year’s budget, the proposed PAYE system is: from K1,000, 000 and below- zero per cent; K1,000,000 to K1,735,000 per month- 25 per cent, K1,735,000 to K4,200,000 per month - 30 per cent and above K4,200,000 – 35 per cent.

Dr Musokotwane said government would further provide relief by increasing the exempt portion of income paid at termination of employment from K25 million to K35 million and increasing the tax credit for differently-abled persons from K1.92 million to K3 million.

And Cottan commended government for allowing agriculture to remain a priority in next year’s budget.

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