ACTIONAID global tax advisor Mtwalo Msoni says there is need for government to create a ‘wealth tax’ where the country’s high-income earners can contribute towards funding development and narrow the huge inequality gap.
And Msoni says government should do away with borrowing money to finance development, but fund it with locally-mobilised resources.
Speaking ahead of the 2021 national budget presentation, Msoni urged government to explore implementing higher tax bands for high-income earners, while cushioning low-income earners in addition to creating a wealth registry that could help finance the country’s huge developmental needs.
“So, even as we look at broadening the tax base, we need to have a critical analysis of how much revenues are actually being generated in these other sectors that we want to broaden versus what is there out there from the wealthier to the poor. So, that is to say that we might be looking at taxing the informal economy, a woman trader very high rates, but if you look at the redistributional effects of tax she might be bearing a higher burden than what will actually be accrued to her in form of public services, which at some point, will not be gender responsive. So, we need to look at where the money is, and like I made mentioned, we have very wealthy individuals in the country, we have very high inequality levels; why don’t we explore ways in which we can have higher tax bands for high-income earners, while cushioning the low-income earners, relieving them from the tax? And why don’t we look at exploring ways in which we can have a registry for wealth taxes. We have a registry for those who are wealthy and they are subject to paying a form of wealth tax,” Msoni said, when he featured on a special interview on Radio Phoenix, Monday.
“There have been efforts by the Zambia Revenue Authority (ZRA) in the recent past with the digitalisation of tax payments trying to make tax payments easy for people in different sectors. There have been conversations about tapping into the informal economy, the traders across the country, in terms of increasing the tax base, but I think something that is of importance and something we need to be cautious about is the aspect of progressive taxation. As ActionAid, we call for progressive taxation because this is a fair form of tax. Progressive taxes means that low income earners pay less. Extremely low income earners don’t pay anything, the ones that earn higher should bear the higher tax burden. Remember, that one of the uses of tax revenue is to redistribute the wealth from the wealthy to the less wealthy.”
He added that a higher tax for the rich was not designed to milk the rich, but that they ought to pay their fair share so that everyone can have access to fundamental human rights.
“By virtue of you being born as a human being, by virtue of being born in Zambia, I have the right to access fundamental public services; I have the right to education; I have the right to wealth so me not having the resources, considering that probably resources have been distributed unequally, and you had access to land, you had access to building material and you now own a shopping mall should mean that I should live as less of a human being, I should not go to school and get that education and this is where government comes in. The fundamental role of government is to ensure that you are okay, you are well off to do and myself, considering that I do not have these resources, and eventually going to have to beg, it’s about you paying your fair share. We are not saying we want to leave you poorer or are blaming you for the inequality that’s happening, but what we are saying is that you, just like everyone else, should have access to fundamental basic services and we should be looking at reducing the inequality gap,” he said.
“We can’t have you have K1 billion in your account when there are people who are going hungry, that’s against the fundamental human rights and the fundamental principles of redistribution of taxation. So, this is something that we need to explore as an avenue in terms of generating revenue to finance development.”
And Msoni said government should do away with borrowing money to finance development, but fund it with locally-mobilised resources.
“If you look at our previous budget, we plan to spend about one in every K5 to service the debt and because of devaluation of the currency, we probably are going higher. I think that is something that we cannot run away from, it’s something that we need to budget for going forward, and for us, I think what is important for us is to try to stay within the target for our budget, which was 5.45 per cent of the GDP in 2020. That requires us to raise more domestic revenues to finance development so that we can do away with more borrowing. Prudent management of resources will also be important if we are to access the IMF bailout package, which would help us with some of the aspects of the import cover and balance of payment deficits. So going forward, of course, we will need to budget a good amount towards debt servicing. This is something that we can’t run away from and we need to do it well. We can’t keep borrowing to finance our development, we need to look at financing our development more with domestic resources. So the 22 per cent target for domestic resource mobilisation as a percentage of GDP, leading into 2020, and we do not expect less in terms of us being at level where we are comfortable enough to finance our own expenditure prudently, of course, and finance our own development and doing away with debt,” said Msoni.
A wealth tax is a levy on a percentage of people’s net wealth designed to reduce income inequality.
The tax policy is usually applied in advanced or more developed economies where it could be applicable to citizens’ financial investments, property, art and valuables, among other revenue-generating assets.