GOVERNMENT will undertake a comprehensive reform on tax policy to ease the tax burden on personal income taxpayers.
Currently, the first K800, 000 is exempt from Pay-As-You-Earn (PAYE).
Minister of Finance and National Planning Situmbeko Musokotwane assured the International Monetary Fund (IMF) that the 2011 fiscal policy will focus on creating space to facilitate spending on infrastructure and the social sector.
Dr Musokotwane said this in a Letter of Intent to the IMF dated June 3, 2011.
He said Government will continue to improve the performance of revenues by drawing on technical assistance from the co-operating partners and also conclude the auditing of the mining sector.
“In the medium term, the focus will remain on undertaking a comprehensive reform of the tax policy and administration to improve the performance of customs and excise taxes, to ease the revenue burden on personal income taxpayers,” he said.
Dr Musokotwane said domestic revenues are projected at 19.3 percent of gross domestic product (GDP) on account of strong economic growth and improved metal prices.
He said macroeconomic objectives in 2011 are to sustain the high levels of growth in the economy, lower inflation and strengthen the economy against external shocks by building up gross international reserves.
He said the increase in revenue will be driven by growth in income taxes, from 9.4 percent in 2010 to 10.1 percent of GDP on account of collections of mining taxes, including tax arrears.
Real GDP growth in 2011 has been revised upwards to 6.8 percent from an earlier projection of 6.4 percent driven by the mining, construction and transport, storage and communication sectors.
He said inflation is projected to close the year at seven percent while gross international reserves are projected to rise to at least US$2.4 billion, or 3.4 months of prospective imports.
He pointed out that recent development in both the global and domestic economy present downside risks.
“If oil prices remain high or continue rising, this has the potential to drive up inflationary pressures in oil importing countries and slow global growth.
On the domestic front, the recovery in private sector credit, from the sharp contraction during the global financial crisis, needs to remain consistent with underlying demand in the economy to avoid fuelling inflationary pressures,” he said.
Dr Musokotwane said expenditures are projected at 24.1 percent of GDP with 3.4 percent financed using foreign grants and loans.
He said wages will decline slightly to 7.9 percent of GDP from 8.1 percent while domestically financed expenditures or the social sectors and infrastructure development in the transport sector will increase to 50 percent of the budget compared to 35.7 percent in 2010.
He said the budget outlay for maize purchases will be K653 billion, a reduction of 46 percent in 2011 (about 0.6 percent of GDP) compared to 2010.
The overall fiscal deficit (including grants) has been projected to decrease to 2.9 percent of GDP from 3.1 percent recorded in 2010.
Dr Musokotwane said domestic financing will be limited at 1.3 percent of GDP, which is 1.5 percentage points below the outturn in 2010.
And Government intends to issue its sovereign bond in the second half of this year.
Dr Musokotwane said the bond issue will be used on infrastructure development, in particular roads and power projects.
“In this context, the government will carefully consider maturity and exchange rate risks, and the debt sustainability and cashflow implications,” he said.
Zambia was in March this year assigned a sovereign credit rating of B+ by Fitch and Standard and Poor’s Ratings.
Dr Musokotwane said Government intends to take appropriate measures for a successful bond issue, which include the procurement of legal and financial advisors, the use of collective action clauses and will consider phased issuance.
[Zambia Daily Mail]
Good move even if its to late.i hope you are not just talking to attract sympathy & votes from poor workers.
Don’t be too technical for nothing we want these figures to be translated in meaningful life of a common man and a poor civil servant. Dont preach that the economy is doing fine,i’ll tell u when we get the benefit
Doc. about windfall tax?
Its long over due man, hope you are not just trying to get our votes.
Basakala nyongo imwe.
Hehehehehe Yaba! Ayamba kuba ma policies ya “Lower Taxes, More Jobs and more Money in your Pocket!” Old man u r our dullest finance minister ever. As some1 advised don’t be too technical for nothing
i thought the Current first K1000, 000 is exempt from Pay-As-You-Earn (PAYE).?? this is all lies by the mmd……….yaba !!!
This would be a relief on us Pay As You Earn payers. But how true is this? Considering that its just before the announcement of the election date or Our president has decided “Don’t Kubeba” the election date. God guide us all.
Point of correction bwana Minister,the current tax exempt i at K1,000,000 NOT K800,000.Dont kubeba…………..
May be GOVT is still in 2010-2011 financial year(800,000).Us dont kubebas are in 2011-2012 financial year.
NO VOTE FOR YOUI///////////////////:-?
time has caught up with trick stars.well its pray as you earn
How much is the minunum wage?
The real more money in your pockets, not the 90days crap.keep it up.
Interesting. Dr. Muso, when did you realise that we needed to pay lower taxes? Fuel price is high, mealie meal too is high, just the cost of living in Zambia is too high with unexplainable taxes against slave wages. I pitty the civil servants who get ‘change’ as wages and are now the target for those votes. We accept the changes, but remember, the die is casting soon. Wina azatulula chino chaka. Long live mother Zambia
The exempt portion is K1,000,000.
I hope this is an economical statement and not a political
it very interesting that why politics sometime looks childish this same principle of easy tax on citizen which PF talks about and they say it unpractical but are saying the same things.
@14 Anyoko akatulule sekuno ku Lusaka tizavotela amene a ba a RB miseu atikonzela bwino bwino, Viva RB
Muzakuta miseu mukute nakutulula.
Good to see that you agree with Sata
This has nothing to do with elections. Remember the Budget for 2011/2012 has to be prepared and presented to Parliament in October.
Yeah, right…and zambia is in central asia.
@Nachale, I dont have time for dimwits with pathetically low IQ levels like you. Is your IQ in single or double digits? It doesnt matter anyway, It is still pathetic! The budget has to be ready by October! Punkt! It does not dependent on your daily chants of pabwato or the hour. Life has to go on! The organisations that matter in Zambia like the Zambia Farmers National Union are already making submissions. The letter of Intent to the IMF has nothing to do with the election calender. It has to be presented at least three months before the next budget announcement in October. So fcuk off and go and chant your st/u/pi.d political slogans be it for your MMD, PF, UPND, ADD, NAREP or whatever party you belong to. Not every Zambian is a political cadre. Ever heard of independents? You Mo/ro..n!
The man is talking politics, when’s the tax year end March, you wont see the decrease as you will already have voted them into power by then. There will be no incentive for them to keep their promise
An expected language in correspondance from a person who has a Phd in economics. I have always had a problem with highly educated people when it comes to practicallity and now I have a living example in Dr. Musokotwane. All that he is talking is lip service. People should be judged on what they have achieved not on promises.
Are we going backwards???????? K800 000 was last year! If this is his letter to the IMF then we are screwed!
If its the editor, then off with his head!
The articlesays ‘CURRENTLY K800 000’
Indeed workers in zambia are subjected to pay alot of taxes.Apart from paying PAYE if you an
employee who owns a vehicle you will have to pay road tax,carborn tax & fuel levy.if you want to buy units at Zesco for K100,000 you end up being given less all due to deductions like v.a.t,excise duty ,T.V levy etc so as worker we find that most of our income goes to paying taxes.Hope this measure will give us a certain relief.Thanks bwana minister.
MMD, again a party that THUNDERS doing the right thing :)>-
No 23 if you do not understand the so called “lip service” am sure it will not make sense to you… and sure you are on the wrong blog. The net has a number of cartoon blogs which could best be good for you
@21.1 Nachale. And what exactly is your point? Elections or no elections the budget has to be presented in October! Everyone who matters in the Zambian economy is presently making submissions for the 2010/2011 budget. The Zambia Commercial National Farmers Union (ZNFU) have made suggestions as to what they want see in the budget and I entirely agree with their submissions. And please dont mistake me for a political cadre.There is a life outside your usual nonsense of pabwato or the hour! Please tell me someting else or better still; shut up and fly away to your Asia! Kuipa pa mantso!
Cadre to the core!
@Nachale; Do you have a syphilistic brain? What havent you understood about what I have told you? The IMF letter of intent is dependent on the Budget calender not your stu/p..id election calender.The Budget has to be presented on the last Friday of October. And whoever is Finance Minister has to make sure it is ready by then whether or not there are elections. Is it clear now? Go away and shout your political slogans be it The Hour or Pabwato and whatever slogans are for NAREP, UPND, Heritage Party, ADD, Fcuk off or go and get sc.rewed you smelly monkey!
Ba musokotwane ubufi bubi.Why did you come up with the sma idea last year .Please let you translate the same issue into effect this year.
If only we had elections yearly, things would improve drastically
Too late bwana minister, you might as well find some small farm somewhere in your village where you will be raising chickens that is if you are clean and avoid chimbokaila, but when I think of the Zamtel saga, I fear for the worst
tax has been very high at individual level especially those in formal employment due to poor tax administration at ZRA ( failure to tax the informal sector). this government when it run out of cash the indroduce taxes, very soon if you are sported with a lot of houseflies hovering around your buttocks you could be asked to pay carbon tax as that could be evedence of human carbon emmission in line with vehicle carbon tax
Very Funny lol…u made may day. with our current Government anything is possible.
Sata’s plans a now been adorpted.
Alamipanga bussy ba pompwe imwe, am not voting for u.
Viva PF, pabwato!!!!
This MMD Government are crooks, they have started stealing ideas from the PF. PF talks about lower taxes for workers and that they will review the Barotse Document and now you find RB has composed a team of govt officials to look at the document. The MMD thought that this things are impossible, they CANT be done just because they have failed, what a way of solving problems. Any way what ever they are doing we have already made a decesion ni ZWA KUYA BEBELE VIVA PF and DONT KUBEBA
Sata’s plans a now been adorpted.Alamipanga bussy ba pompwe imwe, am not voting for u.Viva PF, pabwato!!!!
This man cannot march Magande, he is so dull I wonder where he obtained his docotorate
lol…..you can’t even spell well. What a great judge of intelligence you make!
#36…make no mistake he is a very educated man. That you can not take away from him. His CV is strong. If the IMF wanted to pick one between him and Magande he would definately have an edge over Magande. But thats were it ends.
@36. He has a Doctorate in Economics from the University of Konstanz in Germany. You must be the one with a ‘docotorate’. And by the way what is ‘dull’ about what he has said. Dont you think that someone who says ‘docotorate’ is dull! You are the same people who used to criticise Magande. Magande only became a hero to PF kaponyas like when he ceased to be Minister. So dont try being clever.
HAHAHAHAHAH SO THEY WILL INCREASE FROM K800,0000 TO THE CURRENT K1000,000 LIKE THEY DID BY SELLING HOUSES WHICH WHERE ALREADY SOLD WAY BACK.ANYWAY NI DONCHI KUBEBA
HAHAHAHAHAH K800,0000
Think of the economy for the poorest of the poor or else!
21 sepato,the current budget is for 2011/2012, the one to be presented in october is for 2012/2013. this is the most dullest, diectionless, hopless/ hapless finance minister zambia has ever had.
#27 I do not understand lip service because i do not believe in talk and theories. Its people like you who live in a fantasy world that should be blogging on cartoon blogs that you seem to be very well aware of. Whilst you swim in these nice economic figures the life of the ordinary Zambia is not improving. The common Zambia is subjected to poor health facilities, poor water supply, poor road infrastructure and you think things are improving. Musokotwane and people like you are detached from the real Zambian situation. Public service delivery is pathetic in Zambia and we have people draped in Armani suits talk about how the economy is doing well. Some crap!
This Doc is lecturing to the Zambians when they have already made up their minds and just waiting to cast their votes. Dr. starting preparing yourself to go and run your block making business. I pity you coz you could have done better lecuring at Unza building more brains but you have become toxic coz of your association with MMD Kaponyas. Wish you the best as you go and campaign in Nalikwanda Constituency.
Funny how the selfsame politicians were sniggering at Sata and PF policies….these people in government don’t know what they are doing period!!
SMH…I think now its starting to dawn on them that you can trigger development via policy change in 3 months.
Lundazi Dweller tell them!!!! But Dont Kubeba
Its strange to see how overly critical some of you people are. Some of you are plain ignorant whereas some of you simply don’t understand that economic delivery is not a something that can be achieved in the short term. Musokotwane was appointed to be minister, unlike some of these other ministers he isn’t there because he wanted a political career. Some people actually are public servants doing their best to serve you- its a thankless task at best.
The article clearly states that these details were given in a letter to the IMF so clearly this isn’t a political gimmick but an economic plan. Everyone knows that taxes are high in Zambia and what he is proposing is not anywhere as extreme as PF’s policies so it doesn’t validate PF’s policies in the least.
Please don’t make excuses for him, whether you are appointed or elected you are a minister and that room he is residing in that photo is a Political office. If he didn’t want to be in politics he would have turned down the offer full stop!!
I’m not making an excuse for him, its a fact. If you want to be a politician you go out and try to get adopted to be an MP. He was appointed, yes it is an honour to be a minister etc. So he has the responsibility of the office he CHOSE. I get that. What I’m trying to get at is that I don’t think he is there just so he can steal your money like some people insinuate. The reality is that he could probably get any international job he wants with the c.v. he has….so clearly he isn’t in this to be a crook. There has to be a point where people aren’t so cynical as to believe anyone who is in the government is there for the wrong reasons. As far as the article goes its clearly a technical letter to the IMF (his former employer)….not a political gimmick.
The fact that he is there, he is tool for the current gov’t like i said if he was happy with IMF position he should have stayed there…let’s not start looking at CVs and gawp in wonderment..we’re past that stage as a Finance Minister you’re judged on what you have delivered or your fiscal policies.
You coming here and writing off everyone except “MMD Bloggers”is BANG out of order and very partisan indeed I expect better from some as articulate as you!!
I agree with you but the problem I have is not that Musokotwane is there for the political gain or to benefit his pockets. In fact I think in his hierachy of needs he is one who is after making a mark for himself. The problem is I don’t think he has the right ways to achieve the intended target. He might also want the best for Zambia but I think he has the wrong ways.
Generally I’m not that blunt, yes that is quite partisan. Funny thing is I’m not pro-MMD. I see myself as a pragmatist and I’ll be the first to say MMD has serious problems in the area of transparency and the fight against corruption. But like you said lets call a spade a spade, generally speaking most PF supporters I’ve seen making comments on articles here say the most *****ic things or simply chant slogans…that is an observation and a fair one.
As far as talking about the minister goes, again its a fair observation. He is clearly more qualified for the job than most Finance ministers Zambia has had….Magande and Musokotwane aren’t in the same league intellectually. He’s comparable only to Fundanga, Kalyalya and Saasa among others. That is an observation also.
As far as the success of his fiscal policy goes, his contribution to Zambia’s increase to FDI goes back to before he was Fin. Minister. He spearheaded the triangle of Hope an initiative encouraging Malaysian investment in Zambia. He’s spearheaded the massive investment into Zambia by the Chinese and that has resulted in clear increases in FDI year on year. Zambia’s GDP growth is very impressive, Zambia is now a Lower Middle income economy, Zambia’s mining output is back up to above 70’s level this can be attributed to him and Maxwell Mwale, Zambia has a sovereign debt rating of B+ which isn’t bad considering we’re a lower middle income country….generally its hard to fault his stewardship of the economy. Only area where improvement can be made is greater mining tax collection.
You talk of all these great things he has encouraged but you’ve also carefully left out key ingredients to the pudding like transparency, accountability, employment welfare for employees and there is nothing symbiotic about these deals…we are getting a raw deal..the wrong end of the stick!!
@Jay Jay, you raise interesting points. Your most important point is probably that we are getting the short end of the stick. Well here is the thing consider Zambia’s position, it is a developing economy and needs FDI more than the companies that give it in many situations. Zambia competes directly against other copper exporters so at the very least at the stage where it is expect that as a default it is not going to get any killer deals that are completely symbiotic. It will take time for that to happen, Zambia will have to reach a critical mass of FDI before it can dictate the terms of investment to would be investors…right now it needs them more…as more investment pours in wages will rise, labour conditions will also improve as competition for human capital increases.
My point is this, everything you are mentioning will eventually happen as a manner of economic principle if Zambia continues to grow economically. Its happening in China now, areas where labour conditions were once poor and wages low (with foreign companies exploiting that for larger margins) now have better wages and labour conditions…why? Because investment reached a point where there was so much competition for labour that these things had to improve, in addition the more investment an area receives the more visible it becomes to the wider world and foreign stakeholders also begin to press for better work conditions. So in other words the points you are raising are encompassed in the goals of the current government’s overall economic desires and are achievable given current (cont’d)
economic fundamentals. The only truly valid point you raise is the issue of transparency. Here again I have to highlight something Dr Musokotwane has been encouraging which is the use of intergrated IT systems across the civil service so that information is easier to share and there is greater transparency. This program existed prior to his becoming a minister but has been promoted by him and others in the government. The problem with corruption is that its endemic in Zambia. For corruption to be done away with it will take a general cultural reformation with people beginning to respect the rule of law more and people reporting corruption more. The problem is people keep quiet about these things and generally will be corrupt themselves given the chance. Laws exist against these things!
People just don’t respect them. Generally Zambians are a lawless, lazy and corrupt bunch. You may call me pessimistic for saying this but it is true, Zambians have a lot of promise but there is still a lot wrong with the way our culture functions. Its dysfunctional…..the cops are just as corrupt as the criminals, civil servants and private sector workers are just as likely to take bribes…tell me how can this solution be solved when a whole culture believes that corrupt practice is a norm. The only thing that can change this is a new appreciation for the law, I believe that this starts with a respect for private property and the rights of the individual…something at odds with collectivist african tradition/culture…if African values and western philosophy can be merged together…
People lets be call a spade a spade…these people are clueless, the country is being run on autopilot, that buffoon RB and his clowns are having a real laugh at our expense….20 years in power you start coming up with “fresh” ideas in election year!!
Its shocking that there is hardly ever any real intellectual debate on these forums and when it does exist its usually Pro-MMD people who have something smart to say. It says a lot about PF supporters, you seem to be a group of disenfranchised, bitter and un-intelligent individuals who blindly follow whatever Sata says the way the people of Nazi Germany followed Hitler. It would be one thing if you actually debated the core issues and gave positive criticisms….all you do is jabber and rant. The minister is clearly being technical because the letter is addressed to the freaking IMF and not to you, and yet you still complain about that, the article clearly states that the information it gives was from a letter addressed to economic specialists at the IMF.
Tiuze kaili. Osa tyola chabe tax, tell us what the new tax regime will look like
@Jay Jay, and I suppose you have all the answers! All this deduced from a letter to the IMF. lol. I’m more pragmatic, the way I see it Zambia’s current political environment is such that a change in government wouldn’t create any meaningful change, if anything it bears a lot of downside risk.
It will take more that populist rhetoric targeted towards the ignorant to dupe me into thinking that Sata will bring any meaningful change to Zambia. He has always been and continues to be the most brutish of Zambian politicians. His party offers nothing beyond a change in government. I am only prepared to give my vote to an opposition party that inspires me on the basis of intellectual rigor and the promise of a cultural revolution that can take Zambia into an economic renaissance.
At the moment such a party does not exist, until it does I’m not prepared to put a brute into the highest office of the land of Zambia- the risk is too great. I’d better have good economic growth and gradual cultural change and growing development than the uncertainty of PF which consists mostly of disenfranchised MMD supporters, the worst of the lot if anything. Ideally if UPND was more democratic and relied less on the support of the people of Southern Province it would be the ideal party to vote into power.
I look forward to the day when a party with a real leader and a strong parliamentary and democratic ethos emerges in Zambia. One which can change the way people think about themselves and build on the economic growth Zambia is starting to achieve.
@ Thoughts..Fair enough my friend..what’s wrong with trying something different instead of being a pessimist, What is the current gov’t going to do differently what it has failed to do in the past 20 years??
Generally speaking I try not to be a pessimist lol. Sorry for coming off that way…..its just that everytime I read LT I see so much nonconstructive criticism…its a little disheartening.
See below for my comments regarding where the current government is acting differently to previous ones during the last 20 years. A distinction must also be made between the MMD as a party being in power and the different governments that have actually ruled during its time in power.
Actually there is a lot that is being done that is different. Like the MFEZ economic zones for example. Also if the continue to encourage foreign mining firms to dual list on the LuSE and other exchanges that will enable local Zambian investors to also gain from the wealth generated from the mines and also force the mines to be more transparent to local investors as they will have a fiduciary duty to do so. Much of what is being done isn’t necessarily new, its just being executed better now which says something about where the economy is now as compared to 20 years ago. The reality is that every developing country goes through a growth cycle and regardless of who is in power the curve will be maintained, the question is who is likely to mess things up more?
So for me the question @Jay Jay is not who can come up with fresh ideas…..but rather who is more likely to continue to manage Zambia’s economic growth and make sure we don’t slip back into economic despondency? The reality is this; no one will make Zambia develop any faster than it is at least not in a very meaningful way…it will continue along its trajectory….however there is greater likelihood that its growth could be slowed down by bad economic stewards.
So taking that into consideration one has to decide whether they want stable continual growth or radical change with a negative downside risk? I’d rather have the safer option. The risk for radical change can only be made when a truly remarkable party that can reform both the Zambian economy and political culture at large.
@ Thought
All those examples given are ine but truly nothing to tap dance about really…but still I seem to sense pessimism in all your postings, Zambia is a very young nation and there is nothing wrong (hate to use the word) trying another party be it PF or UDNP, do you honestly think the performance of the President has been exemplary, he is a disgust you know but you would admit it…anyway i have to jet nice chatting/posting/ debating with you…i leave you with a quote from the great man Machiavelli i think it relates to you….(cont’d)
“he is a disgrace”
@Toughts
” It must be considered that there is nothing more difficult to carry out nor more doubtful of success nor more dangerous to handle than to initiate a new order of things; for the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order; this lukewarmness arising partly from the incredulity of mankind who does not truly believe in anything new until they actually have experience of it”.
Nicolo Machiavelli (1469 – 1527)
Thanks for the quote. I agree with you the current president isn’t great, but Michael Sata would be worse. Here is where I stand, give me a political party that can actually execute the promise of a better democracy and I will vote for them. At the moment no such party exists in Zambia and I certainly won’t vote for a party that doesn’t even practice true internal democracy at its highest levels. I want reform in Zambia as much as any one, I want to see a stronger parliament and a weaker executive. I want to see an independent judiciary, I want to see a professional civil service with zero tolerance for corruption. I want all these things, but I know that PF can’t deliver on these. The sad truth is that it will take a new party with a new way of thinking to truly reform Zambia.
The PF’s biggest electoral weakness is its strategy of lies and deception to win votes. The problem with the strategy is that their members are easily converted by their opponents simply by telling them the truth which cannot be disputed. I have tried it myself and they say “Oh, is that so? Yes what you are saying makes a lot of sense, these guys have been cheating us!” and that’s it, they are converted forever.
@Jay Jay I’m optimistic about Zambia’s future. It is a stable and peaceful country attracting massive amounts of investment in the agricultural and minerals sectors, it has huge promise in the tourism sector and I think we’re only starting to see the promise of change. I’m optimistic that given time the political landscape in Zambia will favor political, judicial and economic reform that makes sense for Zambia. I am optimistic that Zambians have the potential to be regional leaders, lets face it we have the smarts. I’m only pessimistic about the current political situation where leaders insult each other and use populism or where there is a lack of transparency….these things I don’t like. I also don’t like that people aren’t as intellectual as you are when it comes to debate LOL.
Poor Fellows wont understand a thing. All they want to hear are insults and name from the Poor Finishers.
For those of our colleagues who may not know, in simple terms Zambia has been implementing an economic growth agreement with the assistance of the IMF. In the previous performance reviews, Zambia’s performance was successful. What Dr Musokotwane is doing is to give a projection of what government now plans to do in order to sustain the growth. This is what they call a Letter of Intent. The IMF programme has no linkage to elections in Zambia, it assumes correctly that Zambia as a country will continue in perpetuity regardless of who becomes president. Of course if we elect a government whose economic policies are at variance with the agreed IMF set points, then the country will have to start afresh. Not a good prospect considering how far we have come from.
Intersting ey. Still expecting to be in govt next year?
@Katie Good, assuming the name your using is your real one…I will assume that you’re not black. Weird way to start a comment but…I’m happy to see some multi-racial political/economic engagement…I’d love to see more non-black Zambians actively involve themselves in matters of national concern. It will only help Zambian society become more vibrant and make us a better country overall! Happy to see you here!
But why talk about something you intend to do. Why not do it and then talk.
PAYE. Where have you been all along? Too late batata
@64 Guru. “Why talk about something you intend to do. Why not do it and then talk” Should we then do away with budgets, economic planning, business plans and party manifestos because all these are simply things we INTEND to do and there is no need to talk about them? Santa Maria!
These economists of nowadays are day-dreamers coz they dont really practise economics. What is economic growth when your citizens have no jobs?. How many pipo are working in Zambia?. These Guys are complete *****s, we shouldnt even waste time listerning to them
” “In the medium term, the focus will remain on undertaking a comprehensive reform of the tax policy and administration to improve the performance of customs and excise taxes, to ease the revenue burden on personal income taxpayers,” he said. ”
In other words they want to increase taxes on imported and exported goods. However, why not just increase taxes on the mining sector? Their growth doesn’t come from non-existent taxation, it comes from record high copper prices. When those prices decline, they will start closing mines – and do so at much higher copper prices than were ever available to the UNIP government, or MMD when it still owned the mines. (So much for private sector ‘efficiency’.)
# 48 Thoughts
“Its shocking that there is hardly ever any real intellectual debate on these forums and when it does exist its usually Pro-MMD people who have something smart to say. It says a lot about PF supporters, you seem to be a group of disenfranchised, bitter and un-intelligent individuals who blindly follow whatever Sata ”
that is because we are the more than 80 % of the population unemployed living on less than 3 dollars a day.
@Witness, not a good excuse. If you’re using a computer to respond to me clearly you have enough intelligence to differentiate between populist lies and feasible plans. I’m all for a change in government if that government actually provides a meaningful change..not a small marginal upside which comes with the huge possibility of a leader who could become a despot.
Unemployment is high, true….but we can’t in all reason expect to see real sustainable change within 90 days or even 2 years. It will take decades before Zambia becomes like Singapore or China…decades of hard work, more entrepreneurship and a growing and influential middle class to safeguard against the excesses of the rich and the ignorance of the poor.
” He said the increase in revenue will be driven by growth in income taxes, from 9.4 percent in 2010 to 10.1 percent of GDP on account of collections of mining taxes, including tax arrears. ”
In other words, even though we should have a Windfall Tax on mining revenues, they are going to increase taxes on workers. *Even in an election year.* Welcome to neoliberal (supply side) economics. Only a change of government can change the country’s policies.
cont from 69
A situation perpertuated for the past 20 yrs by this MMD despite Zambia being rich in natural reasources. The 90% poorer getting poorer and the rest getting richer. Even apes will revolt after 20 yrs beeing ripped of off natural resources.
” On the domestic front, the recovery in private sector credit, from the sharp contraction during the global financial crisis, needs to remain consistent with underlying demand in the economy to avoid fuelling inflationary pressures,” he said. ”
Pure neoliberal idiocy. Only a neoliberal could look at single digit inflation and 24% lending rates, and start worrying about “inflationary pressures”. Also, if he truly believes in ‘free markets’, why manipulate either inflation or interest rates? Again, so much for ‘free markets’. There are no free markets, just unlimited plunder by foreign mining houses.
” … Situmbeko Musokotwane assured the International Monetary Fund (IMF) that the 2011 fiscal policy will focus on creating space to facilitate spending on infrastructure and the social sector. ”
This should outrage every Zambian. The MMD don’t give a damn about the Zambian people. The minister is a former non-Executive Director of ZCCM-IH, at which time he didn’t even represent the interests of the shareholders, by demanding dividend payments. He was the engine behind the abolition of the windfall tax on mining profits. HE IS THERE TO REPRESENT THE FOREIGN MINING SECTOR, NOT THE ZAMBIAN PEOPLE. As far as he is concerned Zambians can live in abject poverty for another 30 years.
(Continued…) So now the IMF was even embarassed by all this naked greed, because even the IMF thinks it needs to keep up appearances.
So here we have a ZAMBIAN finance minister, assuring the INTERNATIONAL MONETARY FUND, that they are going to spend money on Zambian infrastructure and social services.
At no point did he assure or even address the Zambian people, just his true paymasters, the IMF.
@Mr K, its common for companies not to issue dividends. Apple hasn’t ever issued dividends and currently has 76billion dollars in cash reserves….why? Because they are needed for strategic investments. The mines are more likely to re-invest that cash into expansion so that their shareholders can create greater long term value…..asking for dividends would be plain short sighted.
This is the major difference between him and you. He’s looking into the long term needs of the Zambian people whilst you’re concerned about the short term desires. Whats better, taxing the hell out of mining companies and asking for dividends in an immature sector of the economy upon which we are still very reliant on….or seeking further growth by attracting further investment?
You’re not looking at the long term issues. The reality is that in most countries a growing industries are nurtured and usually given tax holidays until the industry reaches critical mass. The city of Shenzhen in China was built off this model…which Zambia is using now in the MFEZ areas. It makes logical sense in the long term.
Over-taxing the mines during a favorable business cycle is not a sustainable solution to Zambia’s development problems. The solution to its long term problems is further business creation and the FDI coming in helps build whole commercial ecosystems to help feed the new mines’ supply chains.
You also show a lack of understanding of neo-liberal economics. Inflation is a primary driver of interest rates according to fishers equation, BUT you’re not accounting for the default risk which is pretty high. You also seem to have a short memory, not too long ago interest rates were 40%+ for them to half in clearly a sign of progress.
The default risk on commercial loans in Zambia is still quite high, you could argue that this is because of the high interest rates…but these have been on a downward slope…and the banking association of Zambia has stated that better corporate governance could help create more sustainable businesses. Both the SEC and DBZ have stated the same thing. So the problem here is down to Zambian entrepreneurs, not the government or Banks or foreigners!
For once I would like to see people face up and say, yes we can improve the standard of entrepreneurship in Zambia as opposed to always complaining about the darn foreigners lol. Interest rates will continue to go down up to a point, but for them to truly be reduced to single digits it will take a change in the way people do business. Markets are inefficient in Zambia because the agents are inefficient; both in the private and public sector. This comes down to Zambians as individuals needing to up our game.
Regarding income inequality in Zambia, its normal for the top 10% of a population to control 90% of its assets. This is the norm in almost every capitalist society..its how society is structured; those who know how to allocate capital best should do so to the benefit of society.
74 Thoughts,
Good questions all, but here is why I disagree, and I think you will see my point.
” @Mr K, its common for companies not to issue dividends. ”
Neither did Microsoft, and that was justifiable, not only because they were a growth stock, but because they had monopolized the PC operating system market. A market that was only going to grow. This is not the case for copper. Today’s copper prices are 70% speculative. As soon as speculation stops, because of re-regulation of the financial industry, or a market crash, or China deflates, we are back at $3,000/tonne. And that is why it is shortsighted not to harvest windfall profits today.
These are the Warren Buffets of society and they are needed because they are the ones responsible for job creation. So income inequality is normal and I don’t see it as unfair. Generally speaking economies that have tried to distribute wealth via welfare programs have found it to be extremely inefficient and leading to structural unemployment and a huge tax overhead. It works in small countries with large income but not large ones. Job creation is a more effective way of reducing inequality through the creation of a middle class…..and this is happening in Zambia. Look at the urban areas, there is massive residential building and construction taking place, there are loads of cars on the roads…..all of this is indicative of growing middle class that is spending! Be happy!!
(Continued…) In fact, I am the one who is farsighted in wanting to be paid now, because that is the only way to have the money to diversify the econmy and become less vulnerable to the global economy. Right now, whatever prosperity there is, is going to disappear when the high prices disappear. And we will have to wait for several decades before any such opportunity is likely to resurface.
” The mines are more likely to re-invest that cash into expansion so that their shareholders can create greater long term value… ”
And there is no guarantee (because the MMD government did not insist on it) that those investments are made in Zambia. Our money could go to mining operations in Peru, Chile, South Africa, the DRC, etc.
(Continued 2…) ” Whats better, taxing the hell out of mining companies and asking for dividends in an immature sector of the economy upon which we are still very reliant on….or seeking further growth by attracting further investment? ”
Having the mines pay 35% is not taxing the hell out of them, any more than it is for Zambian workers to pay 35%. In fact, they would be simply paying what they are due, which is what the argument is all about. Workers pay at least $1 billion in taxes, the mines paid $50 million. It is not hard to see who is getting the hell taxed out of them.
@ Mr K, I disagree. First and foremost as a principle I believe that profits belong to the shareholders who bear all the risk when they make an investment. If the business cycle is favourable they should be the ones to reap the profits. Gold is now trading at 1600 an ounce, if I were a gold trader I would hate to be taxed extra simply because gold is a favourable asset to hold at the moment. If a company generates super-normal revenues it can also expect super normal profits and the government can also expect more tax revenues via corporate tax….this should the case. The only reason we’re arguing this is because there is massive tax avoidance. You and I and everyone else should be pressing the mines to be more transparent rather than impose an unfair tax.
@Mr K my second point is that any harvest gained from a windfall tax would only be a short term solution to development programs. Sure it would result in increased government spending…..but here is the thing. What happens when the government suddenly spends all this money (which being a bureaucracy it would probably do) and then once the business cycle is unfavorable it cuts the extra spending because its out of cash? That would result in an economic shock that would do more harm than good. The other alternative would be to start a sovereign wealth fund, but at the stage Zambia is at that would be an extravagance….what makes more sense is to somehow get these companies to pump that extra revenue back into the economy through re-investments to scale their production!
On your point regarding Microsoft….Microsoft is no longer a growth stock. Its stock price has been more or less flat for the last decade, hence recent calls by some hedge fund managers for Steve Balmer to quit….though these have been countered. However despite its poor performance on the stock market it still has not issued a dividend. Extra cash is good for acquisitions and re-investments especially for growing companies. Thats the critical factor here, Zambia’s mining sector can be even larger than it is….people need to push the mines to re-invest into production so that even if a downturn comes capacity is maintained and any companies built in the new ecosystem can survive the shock. As such I support private sector led spending led by the mines. Its more sustainable :-)
@ Mr K, I’ve made some pretty good points. Really looking forward to hearing back from you. I prefer this sort of discussion based on the issues and finding actual solutions to them.
79 Thoughts,
” These are the Warren Buffets of society and they are needed because they are the ones responsible for job creation. ”
This goes to the hart of neoliberalism, Ayn Rand, etc. Warren Buffett is not a job creator, he is a profit generator. So who are the real job creators? Customers. Think of even the homeless guy on the street collecting used cans. He sells the cans to a shop or metals dealer. He uses that money to go to the hotdog stand and buys a hotdog. Now he has created a job, or a fraction of someone’s paycheck, allowing them to have a job. Why, because it is customers (demand) that generate the revenues, from which a business owner can pay the cost of doing business, including his employees, and keep the difference between revenues and costs – his profit.
In fact, if he could make the same amount of profit without hiring anyone, he would do so, because it is just more cost (and less profit) for him.
There are in fact businesses who specialize in raiding companies, firing anyone they can, and keeping the pension fund, or other valuable assets, and call that ‘a profit’. This happened during the mergers & acquisitions mania of the 1980s (Michael Milken, Ivan Boessky, Mitt Romney, or in fiction, Gordon Gekko in the movie Wall Street).
” So income inequality is normal and I don’t see it as unfair. Generally speaking economies that have tried to distribute wealth via welfare programs have found it to be extremely inefficient and leading to structural unemployment and a huge tax overhead. ”
Actually the greater the income inequality, the greater the social stability. Example: Japan, which has the world’s greatest level of equality, according to the GINI Index.
Income inequality is also emblematic of a dysfunctional economy, or dysfunctional land ownership. If you look at the GINI index from low (greatest equality) to high (greatest inequality), you can see what I mean, in order:
Take it from any angle (political, economic, environmental…..), as long as the end is adequate food, clothing and shelter for the suffering Zambians it is well.
What we need in Zambia is leaders that want to develop Zambia from the finite minerals we have, these minerals will finish. What will MMD have to show for the considerable wealth Zambia has ? Shopright , 20 pin/day workforce, and mansions being built with no services or roads ?.
Zimbabwe recently launched a “buy Zimbabwean” campain. Just watch how Zambia will be left in the dust in the long run when it comes to home grown development which can not be leave the country at the whims of a very tiny minority. These highest bidder bussinesmen masqurading as leaders are not the answer to our aspirations. How can country with so much mineral exports have almost zero rail infrastructure ? only a GRZ that would rather rent then build, sell than buy and hire than teach, as does MMD would do this.
Companies like Vendata and FQM havent paid any dividents to the Zambian govt for the simple reason that they have had to borrow to bring these mines to life at no cost to the Zambian govt. Vendata, KCM’s parent has just finished sinking a new shaft at Konkola deep at a cost of $700m in addition to building a new 300k smelter.. Production will be doubled and Zambia will soon be having her cake and eating it. It is the same with FQM which is almost doubling production at Kansanshi Mine from 250k to 400k. FQM has recently broken ground at the 300k Trident project. This wouldnt have happened if dividends were been paid out. MrK’s ideas is what led to the collapse of ZCCM because profits were been consumed and not reinvested. It is a shorted sighted policy! Thoughts, I admire your patience!
@Mr K, Japan isn’t really the best case to use as a stable economy….their economy has been stagnant for the last 10+ years….they’ve had interest rates of almost zero percent for almost as long and still have achieved little growth.
I haven’t seen an economy where welfare works the way its intended without creating structural unemployment. The exception to the rule are Scandinavian countries, but they have really small populations for the most part.
As far as corporate raiders are concerned you’re over generalizing. Private equity was known for raiding companies in the 80’s because there was a massive amount of cheap debt and it was a prevailing trend, not so much any more. The exception is perhaps Icahan…but generally speaking these investors are value investors
Seeking growth opportunities. Some hedge funds continue to be suspect, but thats besides the point..private equity is a broad sector and includes venture capital which is directly related to job creation because it is involved with funding the most promising startup companies. So I disagree with you….you have a somewhat twisted view of neo-liberal economics. Yes there are huge inequalities but thats inherent in any system that works. I’m an advocate for larger and more influential middle classes not necessarily more equal wealth distribution…that just doesn’t make sense considering that few people own capital and are responsible for the generation of wealth!
@ Mr K and @ Witness, both of you aren’t really saying anything new. Ideologically I commend you for having some intellectual rigor…but your arguments don’t hold any substance in the long term. You’re supporting short termism if anything. More government spending in favourable business cycles does not equal development….when a downturn hits it just means a lot of infrastructure that can’t be maintained and a government that probably has been made to be swollen.
@ Witness you’re free to develop a business plan and go and build a railway company and provide those services. Don’t wait for an already stretched government to spend on expensive infrastructure it can’t afford to maintain in the long term.
@Sepato how right you are.
Thoughts
even a layman like me can see that One of the main reasons why zambia is expensive for production is the high transportation costs. All by road or air, since it so expensive to produce goods in Zambia becasue of transportation costs, import everything even spoons. This is a visious cycle with Zambia losing on maufacturing jobs.
Every developed or developing counrty started of with hudge goverment intervention in capital projctes like Rail networks. Only this MMD GRZ would want the private investors to deal with the railnet work. But the foreign investors are not stupi.d, they are in it for the short term, we all know the preceptions of Africa, a rail network is for the long term benifit of the country, they are not intrested in that. short term MMD bussinessmen, no vision.
All that said , i think mordern economic theories that work in developt countries, or countries that have a manufacturing foundation and edcucated population like Russia had after the colapse of the USSR do not always work in poor countries. Zambia has no or little foundation, you cant start building from the middle. Right now Zambias minerals and potential agriculture products are in hudge demand. Now is the time to exact the maximum price and concessions possible, for the longterm benifit of the counry, like rail projects from the foreign investors. With no demand for our reasources Zambia will be left high and dry with empty shopright shelfs as there will be no money to import anything. As long as someone bribes them, MMD lease out anything. All those miners have bribed their way in.
@ Witness you’re actually wrong. The railway lines in the U.S. were privately built and continue to be privately owned todate.
Look at the state of Tazara today….its in tatters…why? Because state owned companies are usually a lot more inefficient than privately owned ones generally speaking.
As far as the shortermism of foreign investment goes, thats a broad and unfair generalisation. Yes there are some foreign companies that have very short term agendas..however there are many which don’t. The vast investments being made by KCM and FQM prove that they are in it for the long term.
Here is the main point, there are so many needs in the country and the government can not fund them all.
Running a railway network is massively expensive and can be a very unprofitable affair, what I would suggest is for Zambia to become a regional rail hub because of its central location. In this regard the government’s job would be that of regulator and facilitator for the private sector, encouraging Zambian and companies from neighboring countries to better link their common railway systems so that Angola can directly export to Tanzania and Cameroon with Mozambique. However the government’s role in such a system would be co-odinator, the private sector must lead the effort if an efficient job is to be done.
Regarding exacting the maximum from investors, you have to consider recent history. In 2008 the copper prices fell for some time and this resulted in the closure of Luanshya
Mine. The shoddy investors always leave when times are bad, the good ones stay but will request better terms to enhance their competitive environment or position. So yes now that the copper price is high it seems like it would be an opportune time to exact the most from investors, however what happens when the business cycle changes?
Investors will consider Zambia with great caution because it will gain a reputation for changing the terms of investment with the business cycle. The best thing to do is simply to regulate the environment effectively and have a long term approach to these problems. Short terms solutions are never sustainable….so you’re solutions would help in the short term but be a disaster in the long term.
Infrastructure etc are built over time as more capital is made available to the local financial system and greater local demand for large projects increases also. Its a virtuous cycle that needs a long term approach.
So all in all, @Witness there is a need for patience. Okay now have to do some work. Good night!
Thanks PF, you have somebody to work!
Bloggers vote wisely.Have seen a lot of development recently. Roads, taxes, immobile but mobile hospitals, passing of FTJ, beating of Magande, dissolving of pact, now tax reduction….This year will go down in history as the most interesting although most boring when you watch ZNBC. So the choice is yours and yours only. Who are u putting in office MMD(Aka Unip) or don’t Kubeba(Aka PF)?
98 witness,
All that said , i think mordern economic theories that work in developt countries … do not always work in poor countries. ”
Exactly. Not only that, but what Zambia needs is Great Depression era policies (works projects, high taxation for the mining sector, free healthcare and education, vocational schools, credit for entrepreneurs), not the neoliberal ‘mind experiment’. Opening up domestic markets to foreign goods only destroys local producers, and gives them no space to develop. Free trade has never benefited any undeveloped national economy, anywhere. (Asian Tigers have heavy government involvement in their economies.)
I wonder what other people think. To me these are the same chaps that passes the tax to us because they fail to tax corporations. If you count, there are only few companies paying tax and you will agree that almost 100% will be banks. This has an effect because the banks whether you like it or not are crookes that are after profit. They will recover that tax from me through useless charges in the end i am the one financing the government through PAYE and other indirect taxes. Napsa is also crazy, why can’t they give me my money as a lump sum so that i use it the way i want? The small amounts given are not even enough to make me live my life but will just contribute to stress for me to die early and they end up benefiting from my death. Fellow Zambians, lets wake up!
@ Mr K, great depression economics worked in the great depression! lol. The sort of public spending you’re talking about can only come about in two ways…..either you tax the rich more than you already do or you borrow. I suppose you are going to say tax the mines more…….
I believe the mines should pay the fair corporate tax and nothing more. To overburden the economic engine of the economy doesn’t make sense…to force them be be transparent and pay their fair share on the other hand makes sense. The neo-liberal non-sense you’re talking about seems to be working. Great depression economics isn’t sustainable, it can only be done for short periods of time!
Asian tigers protect their infant industries, they don’t overbuden them…..lets face it mining in Zambia can be developed even more and an industrial ecosystem can be built out of it….but your ideas would destroy that via unfair taxes to fund unsustainable growth.
Asian tigers grew because they had the labour, the capital and the FDI. Zambia has the labour but needs the capital, hence the focus on FDI.