WINDFALL TAX BACK
... High copper prices to benefit Zambia
GOVERNMENT has brought back the windfall taxes to ensure improved revenue by targeting mineral royalties and proposing to replace Value Added Tax (VAT) with sales tax which does not provide for tax refunds.
Finance Minister Margaret Mwanakatwe yesterday unveiled a K86.8 billion 2019 National Budget aimed at delivering fiscal consolidation for sustainable and inclusive growth. The minister said the budget proposed bold and substantial changes in revenue mobilisation and spending strategies in support to Government’s goal for fiscal consolidation. Ms Mwanakatwe said the need of enhance domestic revenue mobilisation cannot be over emphasized and that Government has, therefore, undertaken a review of the various taxes currently being implemented with a view to improve their contribution and minimise revenue leakages. “To this end, Government proposes to abolish the Value Added Tax and replace it with a simpler and non-refundable Sales Tax,” she said. “The proposed measures will ensure that domestic revenue as a proportion GDP increase to 18.7 percent from 17.7 percent in 2018. The 2019 Budget aims to achieve a fiscal deficit of no more than 6.5 percent of GDP from the projected 7.4 percent in 2018, “Ms Mwanakatwe said. Next year’s budget is K15 .2 billion higher than the K 71.6 billion, Government proposed to spend in 2018. In her Budget Speech to Parliament, Ms Mwanakatwe said the K86.8 billion, which is 28.9 percent of Zambia’s Gross Domestic Profit (GDP) had been formulated against the backdrop of the austerity measures being implemented by Government to deliver fiscal consolidation. She proposed to spend K31.2 billion on General Public Services with K14.9 billion and K8.6 billion going towards external and domestic debt payments, respectively. Ms Mwanakatwe said in the same vein, she had allocated to the Constituency Development Fund (CDF) a total of K249.6 million to support projects at the community level. She also allocated K200 million towards compensation and awards. Ms Mwanakatwe further proposed to introduce duty of 30 ngwe per litre on non-alcoholic beverages. She said Government would take appropriate fiscal measures to protect beverages from unfair competition while discouraging import dependence. She proposed to increase excise duty on plastic carrier bags to 30 percent from 20 percent, to discourage use of plastic carrier bags. And in order to reduce the use of used tries that were in most cases the cause of Road Traffic Accidents, Ms Mwanakatwe proposed to increase custom duty on used and retreaded tyres from K3 per kg to K5 per Kg. She also proposed to increase the customs duty on powdered milk to 15 percent from 5 percent. On the mining sector, the Minister proposed to introduce a fourth tier rate at 10 percent on the sliding scale mineral royalty regime which would apply when copper prices rise beyond US$7, 500 per metric tonne. “Increase mineral royalty rates by 1.5 percentage points at all levels of the sliding scale, introduce a fourth tier rate at 10 percent on the sliding scale mineral royalty regime which would apply when copper prices rise beyond US$7,500 per metric tonne. “Make mineral royalty tax nondeductible for income tax purposes, introduce an import duty at the rate of 5 percent on copper and cobalt concentrates, introduce an export duty on precious metals including gold, precious stones and gemstones at the rate of 15 percent; and lift the suspension of the export duty on manganese ores and concentrates which was put in place in 2012 and increase this duty to 15 percent from 10 percent,” she said. Ms Mwanakatwe said the Patriotic Front (PF) Government was committed to delivering a prosperous Zambia for all by 2030. She emphasized the need for unity if the vision was to become a reality. “We must all work together to achieve higher and more inclusive growth,” she said.