Saturday, November 02, 2013

Magande warns govt against unplanned expenditure
By Chiwoyu Sinyangwe and Gift Chanda
Wed 09 Oct. 2013, 14:01 CAT

NG'ANDU Magande says it is surprising that the government wants to shift from expansionary budget to constrained expenditure when a lot of infrastructure projects are still ongoing.

And ActionAid Zambia says revenue mobilisation next year should not only centre on raising taxes but sealing tax leakages in all economic sectors.

Last month, Secretary to the Cabinet Fredson Yamba revealed that next year's budget will focus on reducing government expenditure as a way of containing rising fiscal deficit, which has accelerated from targeted five per cent this year to 8.5 per cent of the gross domestic product.
Finance minister Alexander Chikwanda is this Friday expected to deliver the budget speech to the National Assembly.

Commenting on the upcoming presentation of the 2014 national budget, Magande, who is National Movement for Progress (NMP) president, said it was inevitable for the government to watch its many unplanned expenditures to contain the widening fiscal deficit.

"Just after being in power for two years, you are already constraining your budget," said Magande, one of the longest-serving finance ministers in Zambia.

"The first budget the PF presented, they said it was for Rupiah Banda; the second one was theirs. Now the third budget, they are talking about regressing… it is like we are going backwards."

Magande, who supported treasury plans to contain the widening public expenditure, said there was need to spell out how the constrained budget would not hurt key infrastructure programmes.

"This year's deficit can only be dealt with by reducing your borrowings next year," Magande said.

"If next year, they are restraining the budget, how are they going to finish all the road projects they have started? I accept what Mr Yamba said that we have to constrain the budget next year. But what is going to happen to these roads they have started? It means the projects have to be abandoned."

Magande said proper budget execution could not be achieved in the absence of proper planning.

"Don't be excited that because you can start a road, then that is an achievement," said Magande. "It's how and when we could complete a road."

And ActionAid said sealing all tax leakages should not just be in the mining sector, but in all the other growth sectors of the economy.
The charity organisation said that sealing tax loopholes had potential to improve the overall performance of all tax types and increase efficiency and equity in the tax system.

"Tax mobilisation is not just about copper rentals," Patrick Nshindano, an Economic Justice Project officer at ActionAid Zambia said.

"It is about ensuring effective tax collection," he said.

Nshindano said there were a number of pitfalls hampering the government's ability to mobilise revenue which needed to be addressed in next year's budget.

Citing tax avoidance and evasion by some multinational corporations, Nshindano said the government needed to tackle the vice to increase domestic revenue mobilisation.

He also said the government needed to harmonise company taxation.
Currently, corporate tax rates are sector-based and differ across sectors.

In its proposal to the budget, ActionAid has proposed that the government unify corporate rates towards 30 per cent to arrest revenue leakage through tax planning.

"An example is Zambia Sugar Company which, despite being both an agriculture and manufacturing company, has most of its expenditure deductions accounted for under manufacturing to avoid paying tax at 35 per cent," ActionAid stated.

The charity also advised the government to re-negotiate or cancel double taxation agreements with particular countries, especially those with the Swiss Confederation and the Republic of Ireland.

ActionAid said double taxation agreements allowed foreign-owned companies to choose countries where withholding tax is zero-rated.

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