Q FM Africa's Modern Radio
The Jesuit Centre for Theological Reflection (JCTR) says it is disheartened by the manner in which government has been coaxed to abandon a progressive tax system in favor of one that has inherent weaknesses such as transfer pricing, hedging and trading through “shell” companies.
In a statement, the JCTR notes that the threat of job losses on account occasioning from placing the mines under care and maintenance or completely pulling out of Zambia has caused policy formulators into rescinding a duly approved tax law.
The JCTR says it is apparent that the profit based system was vulnerable to tax planning schemes at reducing taxable profits.
It states that there is need for the government to come up with a comprehensive mining sector tax regime as opposed to piece-meal amendments.
The Centre observes that the return to a corporate income tax pegged at 30 percent and corporate income tax on income earned from mining operations processing at 35 percent and a flat mineral Royalty Tax of 9 Percent for both underground, open-pit operations has serious implications on the 2015 fiscus.
It says the immediate effect is an increase in the primary budget deficit with possible rationing of expenditure and possible soaring public debt.
The JCTR further observes that while it is clear that government has set the effective date of the new mining fiscal regime to 1st July 2015, government has not clarified how to tackle retroactive mining tax arrears from January to June 30th 2015.
It says government should categorically inform the public on measures that will be undertaken to address the anticipated revenue loss from the tax adjustments.
The JCTR adds that as government considers how to fill the gigantic void that has been created by the revision to the mining tax regime, the message being communicated is that sustainable fiscal policy has been eroded by this one government decision alone.
It says this has undermined the sustaining of the positive growth trajectory the country has recorded over the past few years.
The JCTR has since advised government that the revision of the 2015 mining fiscal regime, on account of the gravity and sensitivity of the revenue line, must be implemented simultaneously with other requisite policy recommendations and adjustments to ensure that the 2015 fiscal budget merits international best practice and retains public finance integrity.