The World Bank has warned Zambia that the tax shifts that have been introduced in the 2012 budget are likely to increase execution risks and lead to increases prices.
Addressing the media on the 2012 proposed budget, World Bank Country Director for Zambia, Malawi and Zimbabwe Kundhavi Kadiresan, warned that depending on revenue from the mining mineral royalty and the issuance of the bond on the international capital market, increased risks to the budget execution.
“Once there is increased uncertainty about revenue receipts in 2012 because of significant changes made to the tax structure. Also a greater reliance on mineral royalty, which is likely to be much more volatile than PAYE receipts, would increase risk,” Kadiresan warned. “And two, external borrowing would be difficult to organize given the state of international capital markets.”
The government’s 2012 budget is focused on a strategy aimed at equitable distribution of economic benefits. Towards that end, taxes on low income earners have been reduced, taxes on the mining sector have been increased, budget allocation to social sectors has been significantly scaled up with large increases for agriculture, education, health and infrastructure, user fees for primary health care services have been abolished and grants to local councils doubled.
“The overall thrust of shifts is to enhance pro poor orientation of government’s activities which is commendable,” she said. “These welcome shifts however come with attendant risks. Risks to budget execution are higher because of higher dependence on mineral royalties which are likely to fluctuate with world prices of export commodities and dependence on external borrowing (the planned US$500 million bond offer) from global markets in an uncertain international environment.”
Ms. Kadiresan said at the current market prices the government’s royalty increase (from 3 to 6 percent) was unlikely to cause serious economic hardships to the mining sector.
“However the situation could change if commodity prices go down significantly,” she said. “At that time, the government could come under pressure to review royalty rates. Frequent adjustment of royalty rates could, however, send a signal of unstable fiscal regime, thereby reducing Zambia’s attractiveness as a destination for investment for investment in the mining sector.”
She also said the rise in the royalty rate will alter the competitive ranking of Zambia.
On increased prices of essential goods, Ms. Kadiresan said “a sharp increase in expenditures while reducing tax burden on residents, combined with the recent monetary policy measures aimed at reducing lending rates, is likely to put upward pressure on prices.”
How do you expect zambian to benefits from its natural resources when you dont want to pay any tax>someone educate me.These guys dont want windfall tax and now they are talking about high loyalty rate.
Mad-Woman Kundhavi Kadiresan, You (WB) failed to provide sound advise to global econimies, so we had a recession, You even failed EU, Greece, Italy, Spain,etc leave us alone, we KNOW what we doing..Mining loyalty and Tax is NON Negotiable..We not in the hurry to finish our beloved Copper.
The world bank seem to have been happier for us giving away copper at a give away price while taxing the already poor pipo heavily. PAYE is still high at between 20% to 35% and mineral royalties at 6% someone is complaining. The international community see more eger to see Africa leave in poverty and them collecting cheap resources from africa
These IMF, WORLD Bank EU and shi.t if they were interested in seeing africa develop, we would be where we are now but are good at formulating theories aimed at impoverishing us. They were here as slave traders, explorers, came back in the name of the church, came back as donors but what good have they done to africa?
Yeah, except they did not come in the name of the church. How?
You cant even be my wife kundhavi ! You can only be my girl friend. The IMF and world bank put us in this mess with your fake theories in the first place. Why should we litsen from you again. We are going to do it our way this time. sorry !!
This is our copper, if infestors want a piece of it they have to go by our rules.
This woman Wooooman is a fool. We need to benifit from the mines. if they increase paye , do we all work from mines. do dies in your country not here
What does WB know this western backed organisation was in the forefront in advising ka Chiluba to auction off all Government Companies when even Britain was clinging tightly to them…just go advise the EU on how best to handle their debt crisis…bunch of over-paid economists and bean counters!!
Economics is a disgraced field. They are good for nothing people. WB is a madhouse!
Why don’t we just scrap even the little we are getting whilst we are it iwe ka khumatuvi?? If we can’t earn royalties now when can we??? Some specialists are just there to talk for co-oporates and unfortunately even our fellow Zambian have sold out and become mecenaries, like Bantubonse, always protecting the mining houses’ interests!!!
The previous WB representative seemed to say Zambia needs to tax the mines more. I think.
crazy World bank. She believes in theories.
Viva Zambia.They want poor africans.
The likes of Brazil are doing fine because the never listened to IMF and WB’s “one-size fits all” theories 20 years ago!!
Yaba! Vipuba vina pakisa pa Zed ayi! If you don’t understand economic principles why don’t you stay back and observe?
WB can kiss my .£%$^&
RISK TAKERS ENJOY THE BENEFITS OF THE OPPOSITES TO GREAT ECONOMISTICS OF THIS WORLD. MY BOSS IS UN EDUCATED AND TAKES GREAT RISKS AND HE IS ONE OF THE RICHEST MAN IN ZAMBIA.
What Zambia needs to do is to built and support peripheral industries to process copper into finished products like cables,locks, bullets e.t.c. These will consequently provide much needed employment for the youths. Exporting raw material (Copper) is not going to take the country anywhere even if they increase loyalties, its a matter of hand to mouth. Tell these companies to process the minerals in Zambia, then export finished products at even higher prices. Win-Win
Barotseland can do well to listen to her.
No 11
I have been vindicated on the Windfall Tax after i was called names on this blog that the current cost structure of Zambian mines can not allow the introduction of Windfall tax. Levi was fortunate he tried it when commodity prices were in a bubble.
I will be vindicated again when copper reaches US$5000 per tone. You will see what will happen in Zambia. In lay man’s language thats what the World Bank is saying. Its the same lesson Kaunda refused to learn in the end markets proved him wrong.
Myopic version Phase 5!
**== twachula, lesa twafweni:-ss
World Bank, go and lecture Greece and Italy who are in a crisis. Zambia is not yet there.
Each time zambia tries to benefit from her resources, this WB and IMF are always against!!!
No 15 – From reading some of the comments posted on this blog, a large number of people believe Zambia can go it alone – this, as you quite rightly point out is what happened in the Kaunda era.
Presido SATA did well to keep the chinese nearby. Otherwise these guys would connive to bring copper prices down to put us in a weak position like they did before. Remember anglo?
Otherwise the lasting solution is for us to DIG and use our copper ourselves. After all we dont have any decent infrastructure. Thats why we need to make use of our engineers like proffessor clive chirwa and many others. Economists and accountants just talk.
This time its our way go and advise western countries about those theories madam, as currently we are not interested. You told our country to sell all the mines and said it was unlikely for copper prices to go higher for at least a hundred years and then 20 years later the prices became abnormally high. Sorry we dont need you advice we are ready to take a risk for our people. This is the Zambian formula we are now following, and its not plagarised, its original and specific to Zambia.
Not even 20yrs later. Only 10 yrs later!!!!!!!!
What she is saying makes sense. But then, don’t pay too much attention to what WB and IMF say because they are not God. They get it wrong so many times.
Let’s take the risk and see how it goes. We must get something for our minerals.
I think this woman should hear Nawakwi’s rant on WB’s role in privatisation. Lock the two in a room, throw the key on the roof! Then watch that smoke chimney. LOL
Mdame, Kundhavi Kadiresan
you are paid huge sums of money for selling the Western Idiologies, its your job we understand. Zambians are paid peanuts, and get peanuts, you have lots of fringe benefits sleep in 5 luxury hotels or homes yet owners of resources are sleeping grass thatched houses and there you go to hypothesise your theories. Tell you what? we shall cross the bridge when we get there. for now we shall go with what we have. After all, the bigger the risks the huge the return. so we shall make use of the opportunity and create a platform where to fall on. do not bring your scare theories.
With all due respect to the world bank copper will not go down significantly in the next feq years. The demand from china is pushing copper price up the uk and us governments are now focusing on infrastructure building which means more demand for the commodity. This will increase demand for copper. So advise taken but its high time Zambians benefited from mineral resources.
The risk we are taking with royalty taxes are justified and better than sucking donor aid with retrogressive conditions. I say we take the risk for its worth and maybe we can do away with WB, EU DANIDA en all that bunch!
#23 YOU LIKE READ MY MIND. I AM A RISK TAKER AND 95 % I HAVE MADE PROGRESS THE POINT IS LETS CROSS THE BRIDGE WHEN WE GET THERE. IMF AND WORLBANK ARE CROOCKED INSTITUTIONS; ZAMBIA WILL NOT MOVE IF NO RISKS ARE TAKEN. WHO KNOWS THAT IS WHERE THE GOLDEN SOLUTION MAY BE LYING.
You have to ask – who is really paying her bills?
And if you read between the lines, what they are really afraid of is that Zambia gets away from the donor aid which the IMF controls.
They want control of our economy, and they want to control it through debt. They do not want to see the Zambian economy develop.
We have had enough lectures from WB and IMF, and Never worked..it is about time we get our own home grown Professors from UNZA and CBU, Zedian Subject Matter Experts (SME) in Diaspora to provide answers to our economical development. The BRIC (Brazil, India and China) who are have been poor students of IMF and WB lectures are doing relatively better than clever students (USA and EU)
Kadiresan please! support Zambians. We don’t benefit from your salary. By the way; tell us how much Australia or Chile charges. Tell us they don’t do it this way or that way. Be realistic. We are watching your words.
It is annoying to read about the rot from World Bank. Which success story have they got to show in any African country? Those who avoided them remained successful, such as Libya! World bank advice almost crippled our country -ask Nawakwi, who was once Finance Minister. WB,IMF & other donors are happy when citizens are squeezed in taxes because they know their money is assured. Whether windfall or loyalty taxes,the mining cnies have to participate in one way or the other in giving back to the owners of the land. It becomes a moral issue for them. In this case, the latter has been used which is like striking a balance.
As to the risk of copper price changes, this will be there whether tax or no tax because they are a global market phenomenon. And higher risk takers are more associated with success than being risk averse. This is the rule of the thumb! If u take no risks, what other returns would u expect other than the status quo.
We need to move on with the proposed changes by the govt, which give citizens a bit more income to have increased participation (expenditure) in the economy with a good chance of growing the econom
The UK heavily taxes oil from the North Sea. The World Bank does not complain. Anyway, if these people don’t want our copper, they can go to hell.
Are you guys surprised by these comments thise World Bank lady? I am not. What do you expect from this rubbish institution run by lobbysts for multinational corporations? Isn`t the same World Bank that has been urging Zambian government to collect more taxes from the mines? PLEASE , PLEASE Mr. Chikwanda next year base the whole budget on mine taxes.
Did anybody ask WB for advice?
World bank is always giving bad advice to African countries, always on the side of the western investors. MMD undervalued many industries during privatisation due to their advice and the last thing we need now is their input.
If Zambia is to progress must not listen to the WOLF IS SHEEP’S SKIN, the WORLD BANK! Never, never, never!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! These guys hate seeing an African country making good progress. Watch out they live and survive on misleading so called third world countries. God will deal with her severely!!!
In fact the Zambian government must have majority shares in all the mines on behalf Zambians. The invest must only take away 25% to the their countries and the rest for Zambia. CROCODILE TEARS!!!!!!!!!!!!!!!!!!!!
Argue yo points reasonably she says the pro poor budget is welcome but is risk due to unreliability of metal prices on world market in simple terms and that the loan you wish to have may not come easily cos of the currrent economic problems of the world, now wats there to insult? Just wait aand see if you can prove her wrong otherwise she has a point, We cud have taxed those getting K2m as well as mineral tax just to to cast the net wider.
In other words she is saying, because of the global risk associated with commodities increase your PAYE to fund your budget and let the corporations pay no or little royalties for your natural resources…. did i miss something here??? does anyone have information on royalty taxes in Astralia and Chile?? 70% of the people in Zambia are getting below ZMK5m that is less than $1,000 per month that is about $2.7 per day and you are saying they should concentrate on the PAYE tax base!!???. For your own information we all know that Royalty tax is more effective than company tax with all this transfer pricing going on…
You want to see how Economists are just reading data and preaching cumbersome theories, you watch and see how long the new Italian “EU puppet” economist PM & Finance Minister will be in the driving seat!!
Phew,thanks #41.The bunch of negative comments is amazing.Nothing wrong in what the lady says its true.Whats wrong in the truth that it’ll be hard to execute the $500m bond given the current turmoil in int’l mkts?.True,an increase in mining tax also makes zed less attractive.Also very true on sharp increases on GRZ expenditures & lower taxes will increase inflation pressures.Our naivette on int’l finance matters plus raw emotions on past WB wrongs blinds some of us to current dynamics or GRZ’s own miscalculations.
41 KING,
” she says the pro poor budget is welcome but is risk due to unreliability of metal prices on world market in simple terms and that the loan you wish to have may not come easily cos of the currrent economic problems of the world, now wats there to insult? ”
What is wrong is the WB obsession with inflation, at the cost of the economy. A little of the right kind of inflation is a good thing if it means that the economy is growing because of increasing demand for goods and services, and that those services are not increasing at the rate of demand.
The problem is that the WB reduces inflation by reducing demand. Cut back on services, increase fees for what used to be free, no investment in education or healthcare.
At the same time they facilitate the economic plunder of our resources and pass it off as ‘economic growth’ (‘GDP’). They work in collusion with the mining corporations and the banks who own them.
From the article: ” Also a greater reliance on mineral royalty, which is likely to be much more volatile than PAYE receipts, would increase risk,” Kadiresan warned. ”
PAYE takes money out of local circulation and puts it in the hands of the state. On the other hand, the wealth of copper goes out of the country, never to be seen again.
So how can we really stimulate the Zambian economy, I wonder? I suggest by taxing the heck out of the mines, and let workers keep as much of their salaries as possible.
In other words she is saying, because of the global risk associated with commodities increase your PAYE to fund your budget and let the corporations pay no or little royalties for your natural resources…. did i miss something here??? does anyone have information on royalty taxes in Astralia and Chile?? 70% of the people in Zambia are getting below ZMK5m that is less than $1,000 per month that is about $2.7 per day and you are saying they should concentrate on the PAYE tax base!!???. For your own information we all know that Royalty tax is more effective than company tax with all this transfer pricing going on……..
Bloggers; all she is saying is that the pro-poor budget (which is a good thing) is depending far too much on copper and borrowing from the external market. If copper prices go down and external buyers are not so intereseted in buying our bonds then we may not be able to meet our budget. Its just a warning. Some of you like to compare Zambia with Austarilia but Austrailia is a big agriculture and manufacturing economy they dont depend on their minerals like we do.
We are stuck between a rock and a hard place due to being africants. We have enough western knowledge but we cant utilise it to our advantage. Maybe its because we are designed to be hunter gatherers. Thats why when left to our own devices we fall back to our default settings(hunter gatherers). The europeans have been hauling our copper and other minerals for decades which they have used to build their infrastructure and obviously stock piling most of it. They also recycle some of the copper if it is cheaper than importing fresh copper.That is is why they can afford to dictate the prices or stop importing altogether until prices favour them. The solution lies in us utilizing our engineers properly.
Is that woman an economist or a party carder. Zambians will determine how to run and acquire they own resources..
The criticism levelled against the WB by some above is totally misplaced. Copper just like any other commodity is at the whims of the markets. You cannot design fiscal policy on the hope that these commodities will forever enjoy favourable prices. I still maintain that Zambia’s focus should remain that of attracting investment both local and international so the country can grow jobs. And that includes diversifying the economy. Taxing the mines in a fortuitous manner is merely populist and will not get the country very far. My dollar.
This madam should read before making her comments or observations. Has she read what her predecessors were telling Zambia? They all said Zambia should benefit from her resources, including the former British and American diplomants who had stayed in Zambia for sometime and had observed how we were being ripped off. In countries where trade unions are awake, they would have protested agaist her statement which is urging government to squeeze the poor workers even more!
SORRY MAYO IMWE NGAMULONFWA ICHIBEMBA TAMWAKWATA AMANO,YOU HAVE FINISHED OUR COUNTRY TO THE END THIS TIME AROUND WE ARE GOING OUR WAY PERIOD.TELL YOUR BOSS ATI BAKANA NA BESUKA UMITWE.TO HELL WITH YOUR THEORIES.YOUR STATEMENT IS NOT DIFFRERENT FROM SOME TELLING HIS FREIND TO VOTE FOR MMD WHEN ONE HAS SEEN THAT THEY HAVE FAILED.YOU DISTROYED OUR ECONOMY LEAVE US WE DO IT OUR WAY.TAMWAKWATA NO LUSE
SORRY MADAM ZAMBIA IS IN A DIFFERENT BOART ( PF) TRY GREECE MAYBE.THE BOART IS ALMOST HALF WAY WINDFALL TAX
SORRY MADAM ZAMBIA IS IN A DIFFERENT BOAT ( PF) TRY GREECE MAYBE.THE BOAT IS ALMOST HALF WAY WINDFALL TAX
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