GOVERNMENT has again increased the tax exempt-threshold by K200, 000, meaning more money in people's pockets while projecting to create over one million decent jobs over the next five years.
This is the second time that the Patriotic Front Government has made significant upward adjustments to the Pay-As-You-Earn (PAYE), with the first time being last year when the tax-free threshold was increased from K1 million to K2 million.
Finance Minister, Alexander Chikwanda disclosed this yesterday, among various other landmark proposals that Government has made for the 2013 national Budget.
The PAYE exemption threshold has been increased by 10 per cent from the current K2 million per month to K2.2 million, meaning that workers getting K2.2 million and below will now not pay tax.
The measures are aimed at fulfilling the 'more money in the pocket' promise.
The percentages for the four tax bands have been maintained while all the amounts have been adjusted by K200, 000.
The 10 per cent adjustment is at a rate higher than the expected inflation target of six per cent for 2013.
Mr Chikwanda also announced a proposed tax deduction exemption threshold for pension contribution to K255, 000, collectively enabling workers to retain K257 billion.
He said to enhance the take-home pay of employees, the Government proposed to increase by 64.5 per cent, the tax deduction for pension contribution, to K255, 000 per month.
"Sir, as a result of these two measures, an additional K257.3 billion will be put in the pockets of our industrious workers," he said.
To address the high unemployment levels, Government has projected to create a total of more than one million jobs in various sectors over the next five years.
Mr Chikwanda said the agriculture and forestry sectors are expected to provide the bulk of new employment opportunities, with about 550, 000 new jobs targeted over the next five years.
The tourism sector, which Mr Chikwanda described as being pivotal to the PF Government's platform to create gainful employment for Zambians, is expected to create approximately 300, 000 jobs while the manufacturing sector is expected to contribute 90, 000 opportunities over the next five years.
The Minister pointed out that Government had planned to pave about 2, 000 kilometres of township roads using labour-intensive paving block and cobblestone technology.
He said this was an environmentally-friendly and labour-intensive technology which will be piloted in 15 sites across the 10 provinces, creating more than 20, 000 jobs.
Mr Chikwanda said the intention of the Government was to significantly transform the economy by focusing on sectors with high employment creation potential.
Government has in this regard formulated a National Strategy for Industrialisation and Job Creation, which prioritises four major areas namely, agriculture, tourism, manufacturing and infrastructure development.
Mr Chikwanda has also proposed the zero-rating of Value Added Tax (VAT) on wheat and bread to reduce the cost of living for families and promote domestic production in the sector, leading to revenue loss of K100 billion.
To promote the spirit of free enterprise in the country and reduce the cost of doing business, he proposed the removal of customs duty on a wide range of mechanical and electrical machines.
The affected machines include engines of cranes, conveyor belts, cutting machines and grinding machines while to promote information technology duty on automatic data processing kit, optical readers and transcribing and processing data would be removed.
Mr Chikwanda proposed to remove duty on various non-electrical energy sources, various pieces of equipment for health and veterinary care, and to zero rate the excise duty on carbonated drinks and water.
"With these measures I expect that these drinks will become more affordable for Zambians. This will spur the growth in the beverage sector, contribute to the creation of opportunities for forward and backward linkages in the economy, as well as promote employment," he said.
"The Government fully appreciates the myriad needs of the people. They require decent work that provides sufficient income to support and feed their families. They require a well staffed and adequately equipped health care and educational system and training opportunities that will empower the youth with the skills needed for the 21st Century.
"They need improved access to clean water, good sanitation, decent housing and food security in their communities. They also desire a more responsive Government that allows for more decision making within their local communities.
"It is our responsibility, as a people-centered Government, to foster conditions that will promote accelerated delivery on these real and noble aspirations and to achieve these aspirations, Government will ensure the economy continues its strong performance," Mr Chikwanda said.
He said the Government was determined to fulfill the More Money in Your Pockets slogan adopted by the Patriotic Front prior to the election victory last year.
"When we came into office just over a year ago, we promised to transform our country by adopting a more people-centered development agenda and by so doing, deliver more money in people's pockets.
"Let me state without reservation and ambiguity that we are determined to deliver on this commitment," he said.
This year's Budget is premised on the theme: "Delivering Inclusive Development and Social Justice".
To help restore a culture of savings and investments, the Government proposes to remove tax on interest earned by individuals from savings and deposit accounts.
It further proposes to abolish the medical levy which is currently charged on interest earned on savings and deposit accounts, treasury bills, Government bonds and other financial instruments.
The measure would result in the retention of a further K40.6 billion by the taxpayers.
"In order to compensate for the revenue loss arising from the above measures, I propose to introduce property transfer tax at the rate of 10 per cent on sale or transfer of a mining right.
"I also propose to reduce to 25 per cent from 100 per cent the capital expenditure deduction rate applicable in the mining sector, and further provide that capital expenditure will only be claimed for deduction from the year the capital asset is brought into use in the business," Mr Chikwanda said.
The Government projects to raise K265.7 billion from the measures.
Mr Chikwanda explained that the Government would not embark on a path of giving handouts but build a self-reliant people who would be able to sustainably generate money for their own pockets.
"This is the surest way of sustainably defeating poverty and delivering the inalienable rights of liberty and social justice for all our people," he said.
On sectoral performances, Mr Chikwanda said agriculture was the lifeblood for the majority of the people and its development was not merely an aspiration, but an imperative.
He said the Government would boost crop and livestock production, and strengthen agriculture's forward and backward linkages to other sectors of the domestic economy to exploit its full development potential.
To boost and diversify crop production, the Government would expand the scope of the Farmer Input Support Programme to include and cover other crops such as soya, cotton, sunflower and rice.
Mr Chikwanda said the Government would concentrate on livestock restocking as well as create fiscal space to finance the core agriculture sector programmes, adding that the Food Reserve Agency would be restricted to managing the nation's strategic food reserve.
He said the measures to improve the sector would result in the creation of 550,000 jobs over the next five years.
He said tourism was another viable sector but had been beset by various constraints such as uncompetitive tourism products characterised by high cost of rooms and consumables, and poor access to tourism sites.
"Our goal is to promote product diversification, invest more in tourism infrastructure, streamline licensing procedures and also enhance capacity in the hospitality industry. Tourism in pivotal to the PF Government's platform to create gainful employment for Zambians," he said.
The Finance Minister said the strategic focus in manufacturing would be to promote products that could be competitively exported or successfully substituted for manufactured ones.
"We intend to promote and facilitate value addition to locally available raw materials by putting in place appropriate industrial infrastructure for small and medium scale enterprises, particularly in rural areas as well as promoting Foreign Direct Investment in the Multi-Facility Economic Zones," he said.
Additionally, Mr Chikwanda said poor infrastructure, especially in the roads, rail and power generation sectors had hampered the country's ability to compete favourably in the region.
This had also led to the cost of conducting business being high and limited the productive sectors to grow and create jobs.
"To address this, the PF Government is committed to investing heavily in Zambia's economic infrastructure, hence our successful entry into the international capital market to raise development finance for this purpose," Mr Chikwanda said.
In rail, Mr Chikwanda said the Government intended to make significant capital injections with the aim of leveraging further support from the private sector.
The Government also targeted to improve performance in the energy and social sector policies through committed investment.