Centre for Trade Policy and Development (CTPD) executive director Isaac Mwaipopo has observed that the 2020 budget is focused more on tax collection as opposed to stimulating growth in the economy.
And Mwaipopo says proposals to increase non-tax revenue through increased user fees and fines charged by government departments will negatively affect consumer’s disposable income.
In a statement, Thursday, Mwaipopo noted that the 2020 budget was full of contradictions.
“The tax changes targeting climate change mitigation are not sufficient to creating incentives for the private sector to invest in alternative energy sources. The Centre for Trade Policy and Development (CTPD) welcomes the proposed 2020 National Budget. CTPD has observed that although, there is an improvement in allocation towards some sectors, the 2020 national budget is full of contradictions as many policy pronouncements are not being supported with spending and tax changes. CTPD is concerned that the proposed budget has not carried enough matching measures to support the proposed theme: “Focusing National Priorities Towards Stimulating the Domestic Economy”. Therefore, the 2020 budget is more focused on collecting taxes instead of using tax measures to stimulate the domestic economy,” Mwaipopo said.
The organization also questioned the meager allocation to the sinking fund.
“The move to start working towards dismantling domestic arrears of about K20.2 is commendable. Although, under the macroeconomic objectives, there is no target by which government will reduce the domestic arrears. On the other hand , the allocation of K2.3 billion for the year 2020 is less than the increase in domestic arrears of K4.6 billion, within the last 6 months. Clearly, there is no real commitment to the dismantling of arrears since the pace of accumulation is greater than the proposed rate of dismantling. CTPD is particularly disheartened that the allocation of K1.2 billion to the sinking fund is insignificant compared to what the country needs to raise annually towards the US$750 million Eurobond principal payment due in 2022,” Mwaipopo stated.
And Mwaipopo noted that proposals to increase non-tax revenue through increased user fees and fines would negatively affect consumer’s disposable income.
“CTPD welcomes the move to maintain VAT and wishes to advise government against the implementation of sales tax, especially to the wholesale and retail sector. This progressive tax change which has been mingled with proposals to increase non-tax revenue through increased user fees and fines charged by government departments will negatively affect consumer’s disposable income and would not result in stimulating the domestic economy,” stated Mwaipopo.
“Government seems to have only improved its assessment of the current economic challenges and pronouncement of measures to be taken but has not translated these into meaningful policy changes and commitments. For example, though government states that it seeks to ensure debt sustainability, the road infrastructure agenda is expected to continue in the 2020 national budget following an allocation of K10.6 Billion and projected increase in debt financing. How will the government create fiscal space when it is clearly failing to muzzle its appetite for spending on projects which has clearly not yielded enough returns towards debt servicing? CTPD is also concerned that the total budget allocation has increased from K86.8 Billion to K106.0 Billion which is way above the planned expenditure for 2020 in the Medium Term Expenditure Framework. The general increase in the budget does not reflect a commitment to austerity measures and “doing more with less’.”