New tax regime

There is no doubt that the new tax regime will have an impact on the overall capacity of the Government to deliver on many promises.

It is just as well that the Government has admitted and reversed what should have turned out to be a totally unrealistic expectation from the Mines which have been saddled by high operational costs at a time when the price of copper has been sliding.

The resulting budget realignment has been a matter of concern.

On one hand the Jesuit Centre for Theological Reflection (JCTR) has come out clearly against, what they see as a retreat against a very progressive tax regime. On the other hand the chamber of mines has welcomed the adjustment as it reflects the reality on the ground.

As in most cases the reality is somewhere in between.

What is true and inescapable is the fact that Government’s decision to eliminate corporate tax on mining and instead increase royalties to 20 percent in open cast mines and 8 percent in underground operations was a response to the declining revenues from the mines partly as a result of falling copper prices and strengthening of the Dollar.

The combination of these factors reflected in the depreciation of the Kwacha, which in turn affected all sectors of the economy.

It is therefore understandable that the recent International Monetary Fund team led by Tsidi Tsikata made very wide-ranging recommendation for the Government to curb the budget deficit.

They recommended fiscal and monetary policy adjustments that will affect Government performance and delivery of signature projects including the expansive infrastructure development programme.

In essence the measures envisaged include fiscal consolidation and diversification of the economy.

Clearly economic diversification is long term while, fiscal consolidation an immediate and enduring impact, meaning the cut backs are inevitable. It is in this respect we join the JCTR in pleading that social services including, health, education, water and sanitation should be the very last areas to suffer negative adjustment.

We do not agree with the JCTR that Government has been unjustly coaxed to abandon the tax regime by mining houses that are bent on siphoning money out of the country by transfer pricing, hedging and trading through “shell” companies.

While it is true that a number of mining companies have been involved in underhand practices, it is also true that copper prices have gone down, the dollar has strengthened and the mines themselves have varying operational costs making a uniform charge untenable.

That is why it is important for JCTR and other civic organizations to monitor and give informed criticism that will help Government formulate and implement policies that will not harm the poor.

It is very common in this country for political parties and some non-governmental organization to sound highly prescriptive  and make highly inflammatory but totally misinformed statements about matters they least understand.

As a country we are faced with a large deficit that has been made worse by the new tax regime. It is time for belt tightening at all levels including within Government expenditure.

That is why we urge JCTR to remain ever vigilant and point out Government excesses to ensure that the least in society are protected.

Categorized | Editorial

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