THE reversal of the mineral royalty tax by Government has effectively shifted the tax burden to the poor, says the Jesuit Centre for Theological Reflection (JCTR).
It said it was disheartened by the manner in which Government has been coaxed to abandon a progressive tax system in favour of one that has inherent weaknesses such as transfer pricing, hedging and trading through ‘shell’ companies.
In a press statement JCTR said the threat of job losses on account occasioning from placing the mines under care and maintenance or completely pulling out of Zambia has caused policy formulators into rescinding a duly approved law.
“It is apparent that the profit-based system was vulnerable to tax planning schemes are reducing taxable profits,” it said.
The centre has called on Government to come up with a comprehensive mining sector tax regime as opposed to piece-meal amendments.
It said the reverse would have serious implications on the 2015 fiscus and that the immediate effect would be an increase in the primary budget deficit with possible rationing expenditure and likely soaring public debt.
“Further while it is clear that Government has set the effective date of the new mining fiscal regime to July 1, government has not clarified how to tackle retroactive mining tax arrears from January to June this year,” it says
Government should also inform the public on measures it will undertake to address the anticipated revenue loss from the tax adjustments.
The centre has further advised Government that the revisions of the 2015 mining tax regime on account of gravity and sensitivity of the revenue line, should be implemented simultaneously with other requisite policy recommendations and adjustments to ensure that the budget merits international best practice with integrity.
“We recommend that the revisions be considered as part and parcel of the mid-year budget review process for the purposes of the budget being comprehensive and all-encompassing of Government revenue and expenditure,
“Therefore it is important to assess trade-offs between different policy options in the overall budget as well as well as economic assumptions underlying the second half of the year and an updated forecast of the 2015 budget outcome,” it said.