Despite the Zambian government having increased its national budget from ZMK 16.7trillion to ZMK 20.5trillion kwacha, many stakeholders still have ill feelings about it. Others have described it as an appeasement budget with the 2011 general elections around the corner.
Consumer Unity and Trust Society –CUTS- international has welcomed the 25% increase in The Pay As You Earn –PAYE- threshold in the Friday October 8th 2010 national budget presented to parliament for next year by Finance and National Planning Minister Situmbeko Musokotwane.
CUTS International Zambia centre Executive Board Chairman Love Mutesa says the increase from ZMK 800,000 to ZMK 1,000,000 forms one avenue for easing the burden on consumers.
However, Ambassador Mutesa like many stakeholders is still not satisfied with the increment hence describing it as minimal because of many economic factors like inflation which are very volatile.
“For instance, someone earning ZMK6,000,000-00 gross was subjected to a total PAYE tax of ZMK 1,628,250.15. The new system will entail a total PAYE tax of ZMK1, 553,250.15 representing a mere ZMK75, 000-00 increase in nominal terms. With the projected inflation at 7% for 2011, this means only ZMK70, 000 in real terms. Therefore, as CUTS, we feel this is still a raw-deal and question the so-called relief to workers when only ZMK70, 000-00 is freed as additional purchasing power,” says Ambassador Mutesa.
Infrastructure development
Government has in next year’s budget prioritised infrastructure development as a factor that will contribute to national development. CUTS International feels this is a welcome move under the understanding that a well developed infrastructure provides a number of incentives for business through lowered costs of doing business and accords a widespread supply of goods and services at competitive prices which ultimately benefits the consumer’s welfare.
However the Civil Society for Poverty Reduction (CSPR) Programs Officer William Chilufya feels the move is an appeasement strategy for electorates as government wants to use it as a campaign platform for next year.
The increase in the threshold at which small scale importers are required to engage a clearing agent is equally welcome. This will help address some of the trade facilitation problems by providing them with an opportunity to increase their import volumes and ultimately be able to increase their disposable incomes.
In the electricity sector the CUTS Chief feels the 15% tax scrapping must reflect in the relief to consumers and at least a stabilization of the domestic electricity tariffs.
“ It will certainly be unfair for power utility companies to upward adjust their tariffs in the short to medium term. This relief to power utilities on imported electricity should trickle down to individual consumers, notes Ambassador Mutesa.
Budget deficit and economic diversification
“On the budget deficit we wish to stress that the trade deficit, in itself, is not bad outcome looking at the stage of Zambia’s development projectile. It is an indication that Zambia is importing more than what it is exporting. What matters is the composition of the imports of which the majority for Zambia, as a developing country, must be capital equipment, a source of medium to long term national economic growth” he notes.
Ambassador Mutesa reveals that the source of worry at CUTS is the type of machinery of which, at the moment, the bulk is mining equipment for digging the country and not those meant for the manufacturing industries. He says such types of machinery do not provide a bed for long term sustained growth but rather end up as a nuisance. He has since called upon government to ensure that the forgone base for future development is compensated by increasing the tax rates and collections from the mining companies and investing in making the manufacturing sector attractive in Zambia.
Zambia must seriously look at diversifying the economy. Strike the iron while it is still hot alternatively make hay while the sun shines. It is in this respect that CUTS supports calls for windfall taxes. If this is done, we at CUTS are sure that consumers will be the major beneficiaries from these developments and the economic diversification that we all want to see develop will not just be a pipe dream.
Following calls for diversification of the economy the Zambian government has in the past two farming seasons recorded bumper harvests with 2008/2009 recording 1.9million metric tonnes with 2009/2010 recording 2.7million metric tonnes of maize. However the calls are that only maize and wheat are recording bumper harvests while other crops have not been prioritized.
By Brian Mwale.
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