Statutory Instrument No. 33 of 2012 - Yipppiiiieeee!!!!

The introduction of Statutory Instrument No. 33 of 2012 by the Bank of Zambia is a welcome move for any one interested in making our country Zambia better economically. I find this, an action worth celebrating over.

For starters, it was not making sense to have Kwacha which is ignored in most transactions within the republic as people preferred to trade in US Dollar. The fact that we have a legal tender, we should use it. Why should rental for housing be in US dollars and yet that house is in Zambia, in Zambian economy? There is no problem with one basing the rent on US Dollar, but that must be a good reason to do so. This action undermined kwacha and made it useless as everything was being backed by the dollar.

Dollarisation

This is a term used when citizens of a country use foreign currency (a US Dollar in this case) in parallel to or instead of the domestic currency as a medium of exchange within the domestic economy. So Zambia using any other currency to quote for prices or to demand payment of any services or goods is dollarisation.

Zambia was one country you could quote your goods and services in any currency with no shame. If there was a visit from Congo, they could have even bought in Congo currency.

But this brought with it many problems which are so severe in most cases it can even be damaging to the economy. A stop to this measure was not only needed, but was needed fast!

Benefits of S.I. 33 of 2012
There are so many positive effects that have been mentioned when issues are refered to the S.I. in question. But all in alll, I think there is only one positive effect that can be linked to this measure and the rest are merely as a result of this. This is the issue of controlling monetary policy of a country by the authorities that may be. There is no point in having monetary policy if at the end of the day, the monetary policy in the country is actually controlled from outside the country.

Zambia has a legal tender of Kwacha. So the authorities will defend and protect the Kwacha as it is the sole currency of the economy. Use of dollar or rand, will mean we tie our economic activities to another monetary authority and can even do away with some functions of the central bank. This is only useful in a country which is in a crisis.

So economic players should actually look at this measure and the great benefit it will come with.

Mis-Understandings
One common mis-understanding of the S.I. has been on the international trade. Most people expect the S.I. to block international trade and has thus brought an imbalance in the economy. Some "wise" people went as far as claiming we can't have the S.I. when Zambia is an importing country.

• Domestic trade is supposed to be conducted in the legal tender of the country. You can never go to the USA and expect to rent a house or buy a TV in Euros or Rands! But you expect this to be done in Zambia? But the problem has been that this dollarisation was left unchecked! So the S.I. simply reminds you of what currency you will use to trade in. It was shameful to walk into these "Real Estate" companies from South Africa even quoting in rands but never in Kwacha!
• International trade can continue and be conducted in any currency you wish. The only thing one needs to know is that the Kwacha is a convertible currency. That said, you can then simply pay even in Rupees as long as you use the bank system to send your money. They will in turn get your kwacha but send rupees. Simple like all other countries do.
• The bank system use will make sure the monetary authorities have control over the transactions and enable citizens buy things from anywhere in the world at no cost to our currency! Thats why when you travel out of the country, you get your usual ATM but with draw dollars or rands depending on which country you are in. The system is able to handle all transactions.
• We have a duty to protect our country and that starts with the currency. Parallel monetary policy has not helped the country at all. (Parallel in the sense that although we have our own monetary policy, it is controlled by currencies that have an embedded monetary policy of the country they come from. We had houses being sold and quoted in dollars leading to the weakening of the Kwacha every single day. Now we can concentrate on making Kwacha strong and viable in the world trade. That starts by making sure it is a legal tender for this country. I don't think I can go buy a car in South Africa with a Kwacha, why should we make possible for anyone else to come and use their currency in our country? 

This is one of the positive issues that economic players in the country should be happy about. After all, the benefits are for all the people around.

I think this measure has been one that has taken too long to be implemented and I'm one of those that think we can do a lot more to help the country prosper!

Well done for S.I. 33 of 2012!


I have heard talk about the problems of the S.I. Basically, the only "errors" the first "errors" I saw was reference to the wrong Act (the typo of year), but that would not injure the spirit of a good law. So we just need to correct that typo and a problematic paragraph and we are good to go. We need such progressive directions in this country to get something out.

Economical Progress in Africa

I have always taken a different view when you look at African Economic progress. Most problems that stem from Africa have never been Economic problems, they have been political.

If the problems where economic, we would simply educate the technocrats and produce economic progress. However, these problems are political! And you can't take politicians to school and educate them in politics. What has made be wonder with awe, is not the top political leadership that lets Africa down, it has been the advisors or some small political muscles that pull strings and lead the country to disaster.

Now this blog is not about politics, I would condemn so many things about politics not just in Zambia but in all African countries. My aim on this matter is try to reconcile the political problems and the failure to move economically - that totally comes from political problems.

Can Economics Cure Political Problems

I would love the answer to be yes to that. I really do! But it always lead to one conclusion which always even leads people into insulting politicians as to why that problem can not be solved.

Look at Zambia now, the politicians have changed, has the economics changed? The sad answer is no! The politicians has one disease which they never learn to cure all the time and in circles and in leads to many failing to have great political life - they ignore technocrats!

The most interesting result has been the usually labeling of technocrats as opposition cadres! One thing is for sure. The same people were labeled as following the current policies when the MMD was in power. It was common when one politician's desires are meant with proper and sound advice to turn and say these chaps are PF! Now the same PF would look at the technocrats as MMD!

Its a never-ending blame game. The only solution is to learn what technocrats do and then follow things through.

I Know It All

This has been the greatest problem in economics. By definition, an economist will read, research, find solutions and recommend to the powers that be. The usual activity among many countries in Africa has been to reject what you are told and issue your own solutions on the matter as you know it all!

Any educated follow of politics will always sight that problem and fun enough, very few politicians ever learn what to do. So the same problems you blame one government, is the same problem you will bring about. What is interesting is always reconciling what is said to former leaders and the new crop of leaders. The day, this trend will be repaired, is the day we will see progress.

What I'm sure about and have seen it growing is that, every country that performs well, avoids rent-seeking behaviour. And believe me, the same people who backed and were "darlings" of one government and led to its fall, will be "darlings" of the party that is now leading and was in opposition. The technocrats see this and they wonder why politicians are so blind.

Hope Out There

The economics to make a country progress is out there. In the same offices that the former ruling party was controlling and is now in the hands of the new government. I can assure you, the first thing they will do is remove the people they think made the other government unpopular, bring in new stuff. But treat them the same way the other party treated people he had. There is no progress. New bosses but the behavior is the same the advise is also thrown out the window in the same manner.

I will give you an example. Zambia has a problem of funds to invest in sectors that will generate economic activity and lead to backward and forward linkages in all sectors in process lead to demand creation and economic progress. Simple.

What is needed? Each economic player contributing his fair share of investment, responsibility and hard work. Any government that takes that as religion will bring more good to the people than any known foreign investment. All of us paying our share of taxes, anyone in the position of power using the power to ensure the resources are directed at intended targets, and companies tasked to do their part of economic activity sticking to that role.

But Our Problems:

1. The government of the day will negotiate with companies of what they should not pay! So the next person will now wonder why he should pay when government has chosen some "angels" not to pay. Then the role of rent-seekers is cut in stone. Each company will come and see a minister or a president and when they fail, there is always the deputy minister! And they feel power to shout at any technocrat who "delays" the granting of incentives. Labels them "opposition!" and wonders how the country could develop! What is funny is that the same incentive may have been drafted by the same technocrat that is now considered an enemy of the government.
2. Lack of appreciating the system. One government comes in, condemns the whole technocratic system spoils the little progress made in the past, and then sets in to develop a better system with no idea what was bad in the previous system. The only people with access to both systems are the technocrats who can be a useful resource of knowledge and progressivity.
3. Then the technocrat is thought of being a fool, when in actual fact only the technocrat knows who the fool is. Why not take the system, study it and improve on it? The one thing our brothers in the Western world have so wonderfully done.

So now with this problems highlighted, can our new government prevent politics into disturbing economics?

Landlocked - Hub Ingredient!

We always view land-locked as an obstacle to technology due to no access to the sea. True, but that's just failing to think out of the box! The opposite can be true - unless you need sea- water to develop.

Zambia has always used that excuse to say we cannot do a lot as we are cut off the sea. But every day I see all these vehicles and unbelievable quality of cars on the road. They are not made here, and maybe they flew in but most of these came in through the sea. So what's the problem? 

We need to think about what we have and use it and not be crying about what we don't have. I worked with computers a lot so examples here may make sense to people in IT better than those completely hidden from the IT age!

To start with, a router need not be at every end of the network, but the starting point. So one located in the centre would actually mean greater reach to all end points. Economics of location also has a similar idea in location theory (which covers both economics and geography). Harrod Hotelling's (1929) location model is based on this idea. The model  demonstrates the relationship between location and pricing behavior of a firm. In the crudest possible way, if firms produce an identical product and charge the same price, location of the firm to the customer will matter! You prefer buying from the closest shop than spend extra on transportation or time to reach a far-off shop. Therefore, our location of being in the middle of Southern Africa should be used to our advantage. It would be easier (and cheaper) for someone going to China or Australia to get to Lusaka's KK international airport from Malawi on or Angola than going to Johannesburg's OR Tambo airport. It automatically makes sense for us to think of creating an airport hub in Lusaka. Develop the current one and allow more airlines to land and connect from here than miss this opportunity. That's why we have a lot of airlines establishing presence in Lusaka! We just don't see that!

So my development agenda in the aviation industry in Zambia would be, to start with an idea of development airport infrastructure in Lusaka. This would allow development of the sector which has trickle down effects to industry, employment, technology, engineering, fuel sector, transportation, accommodation, tourism, etc. And looking at the investment - return ratio, this would be a very good approach as it would inject in all sectors from a single investment. Marketing of the country for tourism would be half-done! People would be in the country even for connecting flights! The second phase would then be to develop the local aviation sector by promoting establishing of budget airlines to move people from one part of the country to the next. This would push local private sector to then develop lodges, motels, hotels for tourist centres. This is a better approach than zero-rating accommodation in Livingstone! We benefit from aviation regardless of how far the sea is! No landlocked economics in that area.

The next arena, is technology! We are nicely placed in the centre of activity. We may not have a direct cable to the sea, but we can use our location. A fibre connectivity across the SADC region would gain more with a technological hub in Lusaka! Besides we have plenty of land such that if we setup server farms and have direct connection to two sea cable connections in South Africa and in Kenya, the whole region would be place in our hands for e-commerce and server farms. The only need to be reliable. The one single issue which I complain about Zambian companies. Imagine how productive Zamtel would be with reliable internet service to all parts of the major cities. They have a land-line network. The single investment of lines need to just be converted to ADSL network supply. They need little effort in making people realise how expensive other service providers are. We all know how much we spend on air-time credit on our mobile phones. Zamtel should not be chasing shadows to catch up with other mobile services, they need to use the resources that they have and beat them all. The Zamtel mobile service will simply be an icing on the cake. In other countries, most small service providers simply rent ADSL servers and do the marketing in order to get a share of the "cake" with the likes of Zamtel. Many will realise this when they visit South Africa and are greeted with "ADSL! you only need a Telkom line". So the investment cost is shared.

If ZESCO ran for half a year without a blackout, I think the development of our economy would jump in double digit percentage! We have put up so many measures as we expect the power to be out any time. So there is un-necessary investment in backup power generators, invertors, etc. A development of the electricity supply would put this country on a good path to achieving greater things. Not only would the stability ensure continuous supply of electricity to industry and encourage production, it would lead to good returns and reliable exports of this.  

Those are sample issues that would bring in some perspectives not addressed by people looking at the landlocked status of the country. There is so much we can do with our status and current infrastructure. We need to think out of the box for any progress to come to this country. We don't need a lot of searching around. Most of these issues need a will on the part of decision makers to make head way. 

Point of great interest has always been on the way most Zambia companies rely on rent seeking for their business to move. The worst possible way to develop. This has led to unreliable decisions from political leaders. Why would a company need to meet the minister? What can they possibly present to him which would not make sense to technocrats who deal with issues on a daily basis? Rent-seeking and all forms of corruption need to be kicked out of business environment in Zambia for any meaningful progress. Alstom's bribery on people in political office should not be seen as an isolated act. We need to  seal all holes that lead to bribery and rent-seeking. That is important. The political leaders need to look at their business, not take up the technocrats area of operation. If they don't want to do that, maybe they need to join the civil service and be technocrats.

There is a lot of expectations on the people of Zambia. We need to work on formulas that will ensure the country moves in the direction that will please - regardless of their political standing. Development is the only key that will get us all moving united together. We need to start thinking outside the box. We can do what we want if only we work on it.

The Case of Gay-Aid Economics

Poverty and Aid show an interesting aspect of slave and master relationship. The west has always used aid to get what they want from the poor. This is the case in point of what I will call Gay-Aid!

Gay-Aid is western aid tied to homosexuality in the recipient countries. It is fully endorsed by the USA that is, President Obama and David Cameron, the Prime Minister of Britain. 

"Gay rights appear to have become a new frontier in diplomatic relations between Western powers and African governments, with the US and UK warning they would use foreign aid to push for homosexuality to be decriminalised on the socially conservative continent.(Gay rights: Africa, the new frontier)" 

The idea is, countries needing aid, will need to support gay 'rights' to receive that aid. A simple do this to get this. The bate here being aid. To me thats a typical slave-master relationship.

This is clearly an indication that one needs to lose their ability to decide on issues of their 'being' and ask the master for a way forward. And I think this is what we need as Africa. To see that Aid really does nothing for the well-being of our nations. Its an investment from a partner who may never mean well at times. The way out is to look at the issues that affect our poor performance in an economy that rely on aid which maybe Gay-Aid or dead-Aid! Imagine trading off the Gay-Aid for good taxes in the mines! That in place will see nations that can decide their future and can decide on what they think is right or wrong. Though this looks more a political issue that an economic one, the moment you allow someone to dictate what is right or wrong for your nation or economy, you lose your destiny. 

Aid has little contribution to Africa's development. This is a tool used to make Africa states dependent on the West for them to use it any time to impose their values and beliefs. This is the only thing that can make great nations go down on their knees and beg for them to implement what the West want.

Why I hate Aid

There is a saying "A beggar is not a chooser". When you beg, the person giving help will determine what you do and how you do it. Ban Ki Moon went to Africa Summit and told the leaders to respect gay rights.(here). He clearly did not care who was there and what belief they hold on the issue. He is the secretary General. Would he do the same at an Arab summit? No! They have wealth as countries and that black gold - oil. They determine their destiny. Africa had almost all leaders on Aid payroll, they dare not react to such statements, the master was talking. That's why I hate aid - it makes you a slave!

The gay rights issue has problems in the USA, some states are fighting for it. Others are not even thinking about it. Does Obama wake up and say the Federal government will not provide services in those states? Of course not! But when it comes to giving aid to poor nations, it is "Central to the United States’ commitment to promoting human rights".

Be Rich and Control

Central to this Aid issue is not of a helping hand, but control. No wonder every one (except a few of us) hate China. The west has painted such a bad picture on China because they can't control it. It has money and hence power to decide what it wants. If those are transferred to Africa, the west loses grip on everything they have been trying to bring to Africa to continuously step on Africa. That is the big issue.

Africa now needs to work on the issues that continuously disadvantage it (aid included). They need to work on multinationals that steal from Africa through not paying due taxes (they actually declare loses but profits are declared in tax havens). They should demand what is due to them, if need be, nationalizing some of the companies would actually make some countries better off! I know a lot refuse that, but has anyone looked at China? If a country is only getting 10% of the returns on natural resources in foreign hands, it would be good to run it on a state level if that company will bring in 20% after a poor investment from an African government. Besides, all returns will be in the country and not sent to their countries.

You can't have all companies run by multi-nations and their governments say bring gay-rights to receive aid and you think you decide your destiny! That is the tool of control you can only avoid by being rich enough to live without aid or multi-nationals running your economy.

What Democracy on Economy?

There is a cry for democracy in everything that is done. If that democracy means doing away with gay-rights, you are not "democratic", but if you ahve oil and oppress women you are a friend to the west, then what is democracy? I have noticed on matters of economic importance, the west will ignore issues of democracy if it will lead to what they like. Unfortunately, there is no control on this issue as it even affects the UN. It will not protect the people if the returns will not amount to anything for the west. Countries that have stood up to such forces, have grown by following their independent paths. China and Russia are a good example. They don't care what the west does now as they have power to define their destiny.

If oil will be gotten through regime change, it will be supported and even leadership made to pay for refusing change. But if it will come through the current regime, people's deaths will not matter. Economics does! Libya and Syria are cases in point. and the key element was the oil.

Economics Matters, Rights Don't!

Gay-Aid is tied to 'rights' for gays! Regardless of the people's beliefs or stance on the issue (like colonial masters deciding for the village). But women in some Arab countries can't even drive a car. Have you ever heard Ban Ki Moon talk about them? He talks about gay-rights. I have not even heard him address Syria. There is oil there!

Africa's New Fight - Economical

The new fight for Africa should be economical, not political. Africa must unite and fight all aspects of the oppressor. If it means leaving the UN, you may have to. What has it done for the continent economically? It would be easier to make Africa stand economically if the UN supported its cause. Do you think Africa has a chance to fight Gay-Aid being promoted by USA and UK backed by Ban Ki Moon? Which nation will stand and say, we are Africans and don't believe in this. Mugabe did, where is he on the economic map? Malawi's economy is a sorry sight - Mutharika spoke about the displeasure of gay activities and the court sentenced some people.

We need to get rid of this Aid issues in Africa and believe we can do it without the west. We can do it. The problem is that we are constantly blocked in our thinking by the west through schemes like aid, human rights grants, etc.

Like Marcus Garvey said:

We are going to emancipate ourselves from mental slavery because whilst others might free the body, none but ourselves can free the mind. Mind is your only ruler, sovereign. The man who is not able to develop and use his mind is bound to be the slave of the other man who uses his mind ..

I end saying...

Africa, Emancipate yourself from mental slavery, None but ourselves can free our minds

Paying Taxes

Something of interest (tax- wise) happened today.

I had a discussion with a work mate about para-statals and their tax payments. And I think we all need take this seriously and see how we can help our country develop.

Who should pay taxes

All companies and entities in the republic need to pay tax. Be it a Ministry, a government institution, an agency, an NGO, etc. That is the normal way things are supposed to work especially for VAT. For income tax, the situation is different. All institutions that earn an income is supposed to pay income tax. That obviously eliminates government institutions as they never earn an income.

The few exceptions are military personnel or agencies, the presidency and such, through the duty-free goods and drinks. So as to make things cheap. And enable them work without disruptions of chasing refunds or fundings. Ok that's my understanding (limited as it may be).

Now my point of interest, most institutions don't want to pay taxes. They want to be a bottom-less pit which can be funded or use its privileges to get favourable treatment but also don't want to contribute to the revenue generation. I'm not talking about the obvious. Think about it, for example why should ZNBC or ZESCO not pay VAT? VAT is a consumption tax (I will always remind people about that), so anything being consumed should be paid for. Since its being consumed and everyone will pay VAT, it will be easier for administration purposes if all paid it. For anyone producing an intermediate product, they will claim it back and only those consuming the product will have the tax stick on them. I buy a Fanta, I pay VAT, ZNBC or ZESCO does not pay? Will that be fair? After all, drinks are to be consumed. Unless they can prove as being an input, then they claim it. After all, the idea of claiming the VAT if one is not the final consumer is in place to enable businesses handle costs.

And another thing. We as a people should take interest in knowing what taxes are being paid by institutions regarded as "public" or of importance. We should not only be interested in knowing what the mines pay. We should know what the mines and other big institution  How much does tax does ZESCO, ZNBC, Shoprit, Game, etc. I think we should also be given an opportunity to see what incentives are being given and the justification of such a move. I would like to know what items are coming in free of taxes and for which companies. I have a stake in this country and a permanent share holder, so I should know. Such disclosure will ensure officers are doing the right thing.

Right now, there is this belief that officers are bribed in issuing tax incentives or allowing items to be treated favourably. So is this true or mere speculations? It can only be best sorted out by disclosing what company A received. And how much revenue loss has resulted from such a move.

Maybe I shold stop here before I get political... seems to be a fine line between politics and economics especially in Zambia.

The More Things Change, The More They Remain The Same!!!

I had a problem with the way the previous government handled issues related to economic well being of the country. They created sacred cows that would be treated differently when it comes to taxes, tax incentives and so on! Tax payers should be protected. Moreover, we should ensure there is a balanced approach to the way people pay taxes! (I'm passionate about taxes - try to understand).

If you are going to let people go without paying taxes, let everyone go! Let us teach people to realize that they need to do things in a proper way! There is no alternative to doing it right. I believe that is the only single lesson you would teach your child. That is the only single think that a government can teach its citizens. Everything else would be dependent on doing it right. You pay the right taxes, you conduct the right business, you engage the right suppliers, you keep the right records for your business and so on.

The Past

We had some businesses which enjoyed "sacredness" under the old regime. I did not like that! Some companies got incentives, while others where taken out of business for the same actions. You needed to know someone up high to get some things done! If you don't rub the right shoulders, your business goes under! That is not a way to run an economic. It looks political, but the whole arrangement affected economics in massive proportions. Rent-seeking was the order of the day. It reached levels that government officials received calls from higher offices to implement certain things (sometimes I'm shocked when I read the papers on what led to some decisions - and always called it political pressure). We have to work at this, economic progress cannot be achieved if politics are involved. I have reminded myself not to be political on this issue as I expect progress and the day we add political aspects, we compromise progress.

The Present

I loved the pronouncements related to corruption and the "hands-off" on the economic that came from the new regime. But I has been disappointed, we have now started promoting street vendors at the expense of shop owners! Some one told me, this is done so as to improve the lives of people by giving them a means to earn a living. They can now afford to buy food, clothes, medicines, etc. This is more so because they have no trading places where they would sell their goods.

It really was a good point. And I looked at it as a right measure. But after reflecting, we need to come back to reality on the ground. The streets are dirty, diseases came spring up any time. There is no order. And there is no taxes being paid by these traders. I have not seen a ZRA officer on the streets! So we have promoted tax evasion and wonder why there are no trading places? What would make the shops in Freedom Way, Cha Cha Cha and Cairo road want to pay taxes? They face competition from the vendors - who don't pay taxes or rent! Its an imbalance in economics with no supporting argument. This is one single disappointment that the present has presented to the economic well being of this nation. I seriously hope it is temporal. We have eroded the tax base even more.

The Real Effect

It looks like the measure is aimed at encouraging entrepreneurship. People can buy and sell without paying taxes. But the real effect is teaching people to look at taxes as optional. An Indian shop owner would see the benefits of trading on the streets than paying rent and taxes!  Mind you, most shops in Freedom Way, Cha Cha Cha and Cairo road are owned by local business men and women. Their businesses are being torn to pieces. Most people avoiding this chaos on the streets stop buying in town and move to malls. They promote foreign shop owners and push their businesses to greater heights. And we wonder why local businesses don't do well? There is no sense in saying "buy Zambian, promote and develop Zambia" when all Zambia is, on the street in chaos yet foreign companies are in nicely ventilated shops, with air-condition and smooth music.

We need to look at this issue and find ways to help people but not by destroying the sanity that town had. We have to do things right. And vendors on the street is not right. They need to feed their families yes, but I think they can feed them better if bigger shops paid taxes which would construct schools for their children and create employment. They can do with selling the same quantity in markets than lose all trade to malls with fresh clean vegetables.

Tax Incentives :(

I have always had problems with tax incentives.... simply because I believe if someone is investing, he is not doing you (as a country) a favour. He is in it for the money, he knows he can make enough profit without incentives before he starts, and the tax incentives simply make him "super-normal" profits! Prove me wrong! No one single person would invest if the profit margin is non-existing or if the profit is only coming in after the tax incentive!!!

My looking at tax incentive maybe wrong to some of you. But in the same vein, thats why I have little understanding of the role of Zambia Development Agency (ZDA). I seriously need someone to educate me! If you are doing a course and the school says do all your assignments, tests, etc, but to encourage, we wont mark them as we will give you those marks (about 50%) and you just need to get more than 50% from both the assignments and the final exam to pass the course - who would let such a chance go begging???? That my people is how I see the tax incentive.

I have always said, to an economist, only two things are certain: death and paying of tax! We will all die, and we all should pay tax! So the logic of tax incentive violates my belief - and I can prove it!

Tax Needs

Taxes are paid for infrastructure, security and other public goods which governments put up. So if a real investor asks for tax incentive, ask him if he can do the roads, pay the police, hospital staff and their buildings while he is running his investment. If he refuses, he shouldn't get the tax incentive! No one investor would be willing to not pay taxes if he wont be assured of security through the police, courts of law, access roads, etc. So if he asks for tax incentive, he simply wants someone else to pay for those services! Just on this point, whats the role of ZDA? To unfairly ask people to pay for services used by these wealthy companies?

Incentive Benefits

I have been looking at a report that will show me the benefits of tax incentives in Zambia (as opposed to the benefits the country would have had if taxes were  paid)! I believe that is the single most important reason for continuing with incentives in this country. Without it, we shouldn't even think about it. What benefit would tax incentives bring if they provide no benefits? We would be doing a dis-service to ourselves, our children, and our children's children!

Getting High on Incentives

I think we have reached a point that we get high on incentives, we may even start asking companies to invest through an incentive of not requiring them to register as a company. Seriously when we reach a stage of allowing companies to steal, as an incentive, we can't sink lower than that. This is through what someone called the VAT "incentive". My little education would not understand this, but I believe people think this is possible.

Let me explain my failure to understand the VAT incentive.

VAT is a consumption tax paid by you and me on final goods that we buy for consumption. For example cooking oil, soft drinks, etc. So the company selling you these things will "hold the tax" and submit to the revenue authority. You pay, they take it to government. If you give that company a tax holiday for that kind of tax, you are asking people to pay to the company (for their operations) and not for public services! Is this normal? I think there is no difference in that action with some someone thieves high-jacking an armored vehicle taking taxes to the Bank of Zambia! Money is illegally being pumped into the company by people who don't want to invest in that company and for no benefits. Its like you simply change the one who is supposed to tax from the tax authority (in this case ZRA) to the company. I think the issue would actually make sense to someone people if you explain it better like this:

The action is like asking government to give back the taxes paid by the people to the company to do with it as it wishes. So the government goes and cuts a cheque equivalent to what that company brought in as taxes. 

There is no basis, no logic! The tax burden is born by people, the company has nothing to do with VAT. They don't pay it, they simply collect it for government. So if you give them what you call an "incentive", you simply giving them money or investing in their company as a government! I would add and say, thats theft! 

I think the only logical tax incentive is to allow every single entity to pay the correct amount of tax due, so that in time, they can pay less as the requirements are met. Without this, they actually open up an imbalance in taxes required, and would lead to more taxes paid in future. I always say, paying less taxes, is actually asking to pay more taxes!

If our taxes don't meet today and tomorrow's requirements, we will need to pay more taxes in future! Don't believe me? What taxes do you think people in Greece are paying compared to what they paid some years ago? Any failure to raise money by a government will lead to people paying more to meet those demands. I know a government can borrow, but ultimately, those loans will be repaid from taxes in the end! There is no one single source of revenue for government that can replace taxes. Actually with tax incentives, you may end up paying taxes to make up for the taxes that a company needed to pay. More so if that is a foreign company which would just pack its bags and leave!

We have to one day call for the end of a thinking that one needs to incentivize investment! Investment comes with or without incentives. As long as someone knows that they will make a great incentive, the business environment itself is enough incentive. Zambia has incentives in that area, investments are safe, we just need to get the taxes and build great infrastructure as the last incentive - not giving companies money!