Tax is a recyclable revenue and the mistake the government is making is to think that meeting collection targets is a sign that the country is on course. Targets can be met by overtaxing the same taxpayers whose disposable incomes dwindle. The ultimate price that the nation pays is economic collapse – I am afraid to warn that our nation is currently moving on the path to recession.
Legal persons(businesses) are not charitable organisations. Thus, they treat tax as a cost to business, which must, in the final analysis, be passed on to consumers or customers. When the state increases withholding tax, for instance, a property business owner will simply pass on the cost to a tenant.
Salary – K5, 000
Rent – K2, 000 (goes to property owner)
Withholding Tax at, say 10% – K200 (the tenant pays government. The property owner’s revenue remains intact, but the tenant’s disposable income reduces by K200)
PAYE at 37.5% (at K3000 exemption threshold) – K750
Transport to and from work – K300 (in this, the worker becomes the end payer of fuel taxes that are passed on by bus operators to commuters)
Supplies – K1, 000 (sales tax, VAT, etc are included by shop owners in pricing. Therefore, it’s the worker/consumer who bears the cost)
Remainder – K750 (when maintained in the account, the worker pays bank charges which are a result of the rate of taxations that are a cost to business. Moreover, the PF government, which is desperate for taxes, will soon start taxing savings as a direct tax).
In our example, it’s very clear that under the current system, it’s not necessarily companies that pay taxes, but the ordinary citizens. When citizens’ incomes reduce through double or multiple taxations, consumption in an economy reduces. This results in job cuts because manufacturers produce less (scaling down).
When workers lose jobs, a visionless government increases taxes again among the remaining workers in order to maintain targets. This is exactly what the PF government is doing, but the price to pay is too high.
In a fragile economy like ours, a tax regime that increases disposable incomes and capital bases of citizens is the only pro-growth strategy.
Once all of us understand how taxation works, we shall appreciate UPP’s alternative policies on taxation. Tax is not government’s money, it’s your money.
Take note that, while the example is on workers, every citizen pays taxes and this includes children when they buy sweets – tax is included when pricing sweets (the importer who paid taxes passed on the cost to wholesalers who in return passed on the same cost to retailers).
PARTY PRESIDENT – UPP
#UPP: #Development of #Zambia for #Zambians!
No PAYE; No Sales Tax; No Market & TV levies; No tolls on Public Roads; Land redistribution & houses for all Zambians.