THE Civil Society for Poverty Reduction (CSPR) has said the Government should in the 2013 National Budget focus on sealing all tax leakages particularly from the mining sector in order to increase and improve equity within the tax system.
And the civil society network has called for the reintroduction of the windfall tax in order to ensure equitable benefits from "supper normal" profits enjoyed by the mining companies during periods of very high copper and cobalt prices.
CSPR programmes manager Isabel Mukelabai said the revenue policy for 2012 should aim at fastening all tax leakages especially from the mining industry with a focus on empowering the mining tax unit of the Zambia Revenue Authority (ZRA).
This will ensure efficiency in collecting mining tax revenue especially from variable profit tax and other mining tax types.
She said the tax administration system in Zambia faces several challenges such as a large informal cash economy, low taxpayers compliance, complexities associated with taxation of international transactions, poor traceability of tax payers and smuggling.
Ms Mukelabai said the proposed measure would result in improved performance of all tax types and increase efficiency and equity in the tax system.
Speaking when she presented a joint position paper on proposals for the 2013 National Budget in Lusaka yesterday, Ms Mukelabai said it was also important for the Government to mainstream the precious minerals industry because the current structure was failing to maximise revenue for Government, thereby leading to losses through underdeclaration and smuggling.
"If the industry is appropriately regulated, export earnings from gemstone and subsequent tax revenue generated can be substantial.
"But to achieve proper regulation will require the enactment of a separate law from the law that governs base metals," she said.
This, she said, would improve and increase equity within the tax system by reducing the burden on formal employees and taxing other sectors of the economy, especially those contributing highly to economic growth such as construction and mining.
She proposed that the Government should reintroduce the windfall tax because it would increase revenue for poverty reduction programmes, investment and national development.
"The windfall and variable tax are not mutually exclusive and as such can be implemented side by side.
"Windfall tax will only be applicable during periods of high copper and cobalt prices," she said.
The civil society network proposed an increase of export duty on copper and cobalt concentrates from 10 per cent to 20 per cent, saying that this would discourage exports of mineral concentrates and as such allow value addition, thereby create job opportunities for the local people.
Ms Mukelabai said in order to broaden the taxation system, the CSPR proposed an increment of withholding tax on dividend by mining companies from zero per cent to 15 per cent.
"We also propose an increase of company tax rate for mining companies holding large licences from 30 per cent to 35 per cent aimed at aligning company tax of mining companies with other companies that pay company tax at 35 per cent and ensure increased Government revenue and equity in taxation system," she said. CSPR also proposed an increase in excise duty on plastic bags from 10 per cent to 20 per cent.
Ms Mukelabai also proposed reduction from the tax rates for the current Pay As You Earn income bands from K0-K2 million at zero per cent and from K2 million to K 2.8 million to 20 per cent, among others.
She said the move would provide further and equitable relief for formal employees and thus encourage adequate incomes for accessing basic needs and services.