Gov­ern­ment in­ef­fi­cien­cies ex­posed by dwin­dling non - tax rev­enues...

Zambian Business Times - - FRONT PAGE -

The sur­vival of any sov­er­eign or gov­ern­ment lies in its abil­ity to raise funds and ap­ply them for the ben­e­fit of its cit­i­zenry or in­hab­i­tants. Pub­lic Fi­nance con­cerns gov­ern­ment fis­cal fund­ing through out­right and non-tax­a­tion mea­sures. Other sources of fi­nance in­clude util­i­sa­tion of the bond and money mar­kets in ad­di­tion to grants or donor aid. The states man­date is to utilise a mix of these op­tions to get the best out­comes for its peo­ple. Re­liance on grants or aid is not sus­tain­able as the in­sti­tu­tions that dish out these funds have in­ter­est of their own, which at times may be at vari­ance with the coun­tries’ in­ter­ests. It fol­lows that old adage that there is noth­ing like free lunch. Fund­ing from aid has strings at­tached and will be used to pro­mote the fun­ders own in­ter­ests that may in­clude among oth­ers the pro­mo­tion of their cul­tural norms, gain­ing ac­cess to the re­cip­i­ent coun­tries pri­vate in­for­ma­tion to use for in­stance in trade ne­go­ti­a­tions or to sim­ply gain ac­quain­tance that can be later ex­ploited. Of course the best aid is that which comes from self-ac­tu­al­iz­ing and al­tru­is­tic in­di­vid­ual or per­sonal growth needs. The im­por­tance of do­mes­tic rev­enue mo­bi­liza­tion needs no mar­ket­ing. If ef­fi­ciently done, it leads to rais­ing of cheaper fi­nanc­ing to fund de­vel­op­ment, pub­lic goods/ser­vices and other ba­sic hu­man needs vi­tal as a foun­da­tion to build a na­tions wealth on. This can also limit the need for ex­ter­nal yet costly fi­nance av­enues such as eurobonds which need care­ful eco­nomic ap­pli­ca­tion of the bor­rowed funds to en­sure a re­turn well above the rates of in­ter­ests that are charged. The Zam­bian gov­ern­ment in­come state­ment clas­si­fies rev­enue as tax or non - tax. The Rev­enue Author­ity-ZRA, the state agency charged with the re­spon­si­bil­ity of col­lect­ing tax­a­tion rev­enue has its ef­fi­ciency lev­els mea­sured an­nu­ally by its to­tal an­nual col­lec­tions rel­a­tive to the an­nual ab­so­lute Growth Do­mes­tic Prod­ucts-GDP achieved in that par­tic­u­lar year. The best per­form­ing rev­enue agen­cies in the world aim to at­tain tax to gross do­mes­tic prod­uct quan­tum in per­cent­age terms within the range of 25% to 35%. Low ZRA col­lec­tion tar­gets as a prox­y­ing pseudo over per­for­mance Zam­bia Rev­enue Author­ity - ZRA de­spite the com­monly held view that they are per­form­ing above tar­get, is more a func­tion of lower tar­get set­ting. For in­stance, the South Africa Rev­enue Ser­vices – SAR’s col­lects in taxes an ex­cess of about 27% of the coun­try’s na­tional prod­uct GNP while the United King­dom Rev­enue Ser­vice col­lects tax­a­tion of about 33% of their GDP. Com­pared to the cur­rent 2018 ZRA tar­get of 18%, you will agree that the in­sti­tu­tion has a long way to go be­cause this level is shy of op­ti­mal col­lec­tion ef­fi­ciency tar­gets com­pared to de­vel­oped na­tions. One no­table fea­ture is that de­spite fo­cus is has been on tax rev­enue which the rev­enue author­ity still has lat­i­tude to im­prove in col­lect­ing, the non-tax rev­enue com­po­nent in Zam­bia is rather dwin­dling. A re­view of the 2017 na­tional bud­get shows that the non-tax rev­enue tar­get was an­nounced at K5.3bil­lion, rep­re­sent­ing 2.3% of Zam­bia’s GDP. Fast for­ward to 2018, the bud­get for non - tax rev­enue di­min­ished to K4.4bil­lion, rep­re­sent­ing less than the 2.3% of the 2017 GDP num­ber. How then is non-tax rev­enue de­clin­ing when more and more sources are open­ing up? Mis­clas­si­fi­ca­tion of min­eral roy­alty as non -tax rev­enue It fur­ther raises more ques­tions as to why the bud­get pre­sen­ta­tion for­mat had been un­al­tered in terms of clas­si­fi­ca­tion for non - tax rev­enue in the 2018 bud­get that re­sulted in the in­clu­sion of min­eral loy­alty as a non­tax rev­enue. As a con­se­quence, the over­all non-tax rev­enue was win­dow dressed and ap­peared as though there had been a growth, when infant not. The re-clas­si­fi­ca­tion of min­eral loy­alty made the con­tri­bu­tion of non - tax rev­enue record 2.9% rise in 2018 in com­par­i­son to the year 2017’s con­tri­bu­tion of 2.3% when infant much lower when you deduct the min­eral loy­alty mis­clas­si­fi­ca­tion. Zam­bia’s non - tax rev­enue ad­min­is­tra­tion lacks proper struc­tur­ing and per­haps this ex­plains why the coun­try is un­able to clearly and con­sec­u­tively show gov­ern­ment per­for­mance. The im­por­tance of on-tax rev­enue lies in its mix of com­po­nents fees and charges levied for gov­ern­ment ser­vices. It is ac­tu­ally a de­fect barom­e­ter that shows the lev­els of ef­fi­ciency of the var­i­ous gov­ern­ment min­istries and agen­cies which pro­vide var­i­ous ser­vices to the gen­eral pub­lic. Non – tax rev­enue un­ex­ploited po­ten­tial The cur­rent trend of non-tax rev­enue, sig­nals un­ex­ploited po­ten­tial for fur­ther growth. Non -tax rev­enue should fetch as high as 10% of GDP through ef­fi­cient gov­ern­ment col­lec­tion sys­tems. Some of the lines which con­sti­tute non-tax rev­enue in­clude ad­min­is­tra­tive fees charged for ser­vices (li­cences, pass­ports, visas, ra­dio, mo­bile and tele­vi­sion li­cences), as­set rentals (in­come from rental of gov­ern­ment build­ings, Road and bridge tolls), fees at pub­lic hos­pi­tals and schools. Other sources in­clude in­ter­est from place­ment of gov­ern­ment de­posits by var­i­ous of its wings, on loans ex­tended by state owned in­sti­tu­tions i.e. De­vel­op­ment Bank of Zam­bia, Ci­ti­zen Eco­nomic Em­pow­er­ment Com­mis­sion - CEEC, debt se­cu­ri­ties; div­i­dends paid by State Owned En­ter­prises -SOEs to the cen­tral gov­ern­ment; rental in­come from the use or ex­ploita­tion of land, min­ing rights, sub-soil as­sets and other nat­u­ral re­sources such as per­mits by Forestry depart­ment etc. How man­age­ment of non – tax rev­enue will curb cor­rup­tion and cush­ion ex­ter­nal fi­nanc­ing needs Care­ful man­age­ment of non-tax rev­enue will not only de­liver more do­mes­tic mo­bi­lized re­sources, it will also curb cor­rup­tion gaps stem­ming from lack of ac­count­abil­ity for funds raised through the var­i­ous gov­ern­ment min­istries and agen­cies. There is need for Par­lia­men­tar­i­ans as rep­re­sen­ta­tives of the peo­ple to not only de­mand de­tailed bud­gets but have these scru­ti­nized with the aim of de­liv­er­ing more re­sources avail­able for req­ui­site de­vel­op­ment. If the Zam­bian gov­ern­ment was to widen its non-tax rev­enue base of say hy­po­thet­i­cally 10% of the es­ti­mated US$21bil­lion GDP, this would raise about USD2.1 bil­lion lo­cally. As such this would negate the need for Eurobond fi­nanc­ing in in­ter­na­tional cap­i­tal mar­kets. The is­sue here is not that we are call­ing for more bur­den­ing of cit­i­zens with ad­di­tional non-tax rev­enue mea­sures, but rather echo­ing more ac­count­abil­ity. These non -tax rev­enues are cur­rently be­ing levied, but with lack of ac­count­abil­ity lead­ing to in­creased op­por­tu­nity for cor­rup­tion and di­ver­sion of funds.

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