By Jane Chanda
Former Commerce minister Bob Sichinga says the UPND government’s economic policies are crippling the economy, leading to reduced economic activity and a decrease in revenue generation.
And Sichinga has questioned the government’s rationale behind increasing expenditure on the Constituency Development Fund (CDF) without identifying the revenue source to cover the expenditure.
Recently, Zambia Revenue Authority (ZRA) director general Dingani Banda expressed concern over the narrow tax base despite the country’s rich mineral resources, emphasising the need for strengthened tax administration and domestic resource mobilisation.
Speaking with Daily Revelation on Wednesday, Sichinga explained that the tax base depended on the economic activities of the country, and the policies pursued by the government dictated the size of the tax base.
He said the government determined who to tax and how much to tax, and that the tax base was a summation of all those sectors which were required to pay taxes.
He gave an example of the road tollgates, where collections depended on the number of vehicles passing through and that if the number of vehicles increased, collections increased too, and if the number of vehicles decreased, collections also reduced.
“The government determines the policies and no one has stopped them,” Sichinga said. “The economic activities have suffered because of their policies.”
The former minister said the government’s policies reduced economic activities, resulting in less money in circulation and reduced revenue generation.
Sichinga said if a lot of people were importing second-hand vehicles from Japan, it increased the number of collections from those taxes.
However, if they did not have enough money to import those vehicles the volume of the vehicles reduced and collections decreased as well.
He pointed out that the biggest economic activity in Zambia was mining, which contributed significantly to the country’s Gross Domestic Product (GDP).
He, however, said the decision to reduce the mineral royalty tax from 6 percent to 3 percent halved collections from the mining sector and that by doing so, the government reduced its collections, and needed to make up for that shortfall by taxing other sectors.
“The policies of the UPND are the reason why the taxation base has been reduced,” Sichinga said. “People are no longer having economic activities that were there before; the economic growth has been reduced, there’s less money in circulation, and because of that, we are not going to generate revenue on which we can tax.”
He also pointed out that the biggest source of public revenue was the Pay As You Earn (PAYE), but he wondered how many people were employed and what they were contributing.
“And so the more people you employ, the better the collections; the less people you employ because there’s no economic activity, the less revenue you would generate,” he said.
Sichinga criticised the government’s decision to give toll gate collections to a Chinese Consortium Company, questioning the rationale behind this move.
“What was wrong with how the National Road Fund Agency (NRFA) was collecting toll fees?” he asked. “The government must be asked why they stopped using the NRFA and what was wrong with it. By doing so, they have reduced the amount available to contribute to government revenue and therefore, the tax base has been reduced.”
Sichinga said unless the government reduced economic activities from various sectors including mining, agriculture, fisheries, and livestock, transport, toll gates – all those sources of revenue would reduce.
“CDF is an expenditure not a revenue, which revenue are they sourcing to cover the expenditure? What is the revenue source now if they said they’ll spend more on CDF? They must have also increased the collections in order to raise money that is required,” said Sichinga. “The government’s policies have been detrimental to the economy, and Sichinga believes that the government needs to rethink its approach to taxation and economic management. The tax base has been reduced, and the government needs to find ways to increase revenue without suffocating the economy.”
