Editorial

It is a well known and accepted maxim that the government’s work is in the regulation that they churn out. Some have even argued that government’s performance should be measured by the number of laws and regulations that are not only assented to, but also get to be fully implemented.

There is also an alternative school of thought that support the theory that the work of government and more specifically leadership can be best accomplished through moral suasion, through propaganda and other psycho-social means of reaching the desired goals.

Whatever means a leadership and government uses, its takes a combination of the two above and combine them with more deeper nuances derived from the country’s rich cultural diversity coupled with the national values that have been selected and are being pursued.

The main contention which the postponement of implementation of the Good and Services Tax – GST (also referred to as Sales Tax) has brought arises from the budget drawing up process. The postponement of the implementation of GST from 1 April to 1 July has raised questions on weather the budget speech is derived from a rigorous enough process  that ensures that proper revenue and cost estimates are worked out and weather there is accountability on the technocrats that aid in authoring the budget speech and do these detailed estimates and projections.

What is expected and the budget clearly explains is that, whenever there is a change in the tax rates, a detailed computation is done on the revenue and cost impact of that proposed change. The budget speech also announces any amendment or adoption of new economic policies and their impact on the budget. Questions such as will the change result in more revenue or the change is an incentive to citizens or businesses?, how would that incentive enable the collection of more taxes in another area to backfill for the revenue loss created?.

Perhaps the biggest issue that this postponement has raised is the credibility of the 2019 budget. You see, the economy and business environment relies on the national budget to project its annual activities and business initiatives. The budget also offers a window into what the macro picture for the country’s economy and outlook is, on how the local unit, the Kwacha is projected to hold up by the levels of estimated government spending that result in either a budget deficit or surplus.

And the most Important of all is the projected government revenue for the year. The growth of this number shows that the economy is growing or that the efficiency of tax collection is improving. This number is so pervasive as it determines the level of funds to be raised by the central bank – BOZ in treasury bills and bonds as well as any planned loans with multilateral and international markets lenders. It’s also the revenue that informs the spending patterns, the entire government system and the country’s private sector goes on to plan based on the estimates of revenue and expenditure included national budget.

Individual citizens are also not left out, for those in formal employment, they look out for pay as your earn tax changes and any incentives that are announced such as minimum tax threshold which all contribute to perceptions of the economic and the government of the day performance. Those individuals in the informal sector look to opportunity to supply the government and policies that make start ups and small businesses more viable.

So, now that the date of implementation has been put forward, what happens to the planned stop of Value Added Tax – VAT refunds to mostly the copper mines who have been reported to have been annually claiming over US$700 million. If you break down this amount, you will note that quarterly, the large scale copper mining companies claim cumulatively about US$175 million, this postponement therefore will cost the government another US$175 million.

This extra US$175 million in VAT claims for this second quarter which is now due to be claimed was not planned for as per the announcement in September 2018 budget speech, which clearly stated that GST would be effected by 1 April and VAT refunds effectively and concurrently be abolished. So who is going to pay for this delayed implementation? Who is accountable for delaying the roll out for such an important legislation when it’s clear that the the country is facing concerns of treasury liquidity? It is this culture of impunity and lack of accountability that we collectively need to root out.

The migration from VAT system to Sales Tax System was announced six months ago, this is half a year period. Are we genuinely saying that there was limited or no time to implement GST by 1 April?? The Zambian government has been in existence from 1964 and has a good cadre of experienced technocrats and professional staff that are capable of giving an accurate estimate of the timelines needed to implement such a massive tax policy shift. Were they consulted, or are there acts of sabotage?

This failure to timely deliver regulation that passes the litmus test of sound judgement has continued to derail our nation. We not so long ago experienced  public outcry on some pieces of regulations that had been implemented such as night ban on all travels for freight and passenger service vehicles which negatively impacted some private sector businesses due to lack of consultation.

We had also experienced regulatory roll backs on the signed statutory instrument to end the quoting of prices in Zambia in foreign currency, a measure that was good for the support of the Kwacha. There was also roll back of a regulation that required all exports to be settled in Zambian registered banks for all Zambian exports to boost forex inflows into the economy, the ban on importation of fruit and vegetables which can be grown in Zambia and are locally available etc, all these pieces of regulation which are key to creating and protecting Zambia’s wealth have been botched due to inept implementation strategies and lack of consultation.

A review of the current regulation shows that a law and an agency exists that mandates all regulatory agencies in Zambia to carry out Regulatory Impact Assessment (RIA) before implementation of new regulation.

The Business Regulatory Act No. 3 of 2014 requires of all regulatory agencies to undertake regulatory impact assessments before introduction of any regulation that affects business. This means that any proposal to introduce, amend, or repeal a policy, regulation, law, Statutory Instrument (SI), fee, charge or levy affecting businesses, collected pursuant to the issuance of a licence, a permit, certificate and authorization as prescribed by any given law, should be subjected to a regulatory impact assessment before its implementation.

The Business Regulatory Review Agency – BRRA became operational in May, 2016, is charged with the responsibility of assisting the Business Regulatory Review Committee – BRRC with the performance of its functions.

However, it’s now over 4 years down the line and the Act is still not fully implemented and BRRA is locked in regulatory lacunae. The Zambian business environment and businesses has at times come under heavy stress from regulation that has been enacted with limited or no business community engagement and negotiations leading to increased cost of doing business and at times loss of employment for ordinary citizens in affected industries. The government now has announced a GST postponement with a potential estimated cost of US$175 million for one unplanned quarter.

Sometimes we ask questions why our rate of growth is low, why we have to accept GDP growth rates of 4%. It’s also an easy option to blame others, to point to the staggering global economy and comfort ourselves that 4% growth rate is ok, our submission is that Zambia can do better and be a shining African example.

our ordinary people are humble and peaceful. It’s those in leadership positions, not only in the public sector, but private sector as well who should follow through and implement the already existing laws and regulation and spur Zambia to notable growth rates of sub 7% needed to create a dent on poverty levels and transform our discourse to wealth creation.

-zambianbusinesstimes.com

LEAVE A REPLY

Please enter your comment!
Please enter your name here