Zambian Watchdog

What did Guy Scott mean when he said draft tax laws with cause panic?

April 28
08:29 2013

scottBy David Ryder 

What do you make of Zambia’s Vice President Dr Guy Scott’s comments on proposed tax changes for companies?

In an interview given in Johannesburg on 27th April he said that proposed tax laws in the pipeline were meant to ensure transparency of private business. However, he did not believe draft documents of the laws should be published as they could “cause public panic” before being approved by Government.

Scott rejected claims that the government of Zambia is “anti-business”, saying it wants to clean up business practices and collect its fair share of tax from companies operating in the country. The government is instead “pro consumer” and “pro competition”.

Curiouser and curiouser

This is a very curious use of language in my view.

“Panic” is usually associated with a crisis or transformative change. It does not usually accompany continuous change. So one has to assume that we are in for a major overhaul of the tax laws governing Zambia, perhaps but not only, focused on the extractive industry but on all foreign owners of enterprises, a favourite target of this government especially after the Zambia Sugar revelations by ActionAid earlier this year.

The new budget is due in September-October so one can assume changes will be effected this year.

Investor Friendly?

Foreign investors take fright at sudden changes as they are seen to increase political risk and projected returns. In a climate of cooling commodity supercycle this could be disastrous for future investment.

Scott’s language will not be re-assuring. Restrictions and controls on repatriation of earnings will be unwelcome coming as they do on top of foreign exchange and interest controls.

The government and the country deserve transparency and compliance to collect what is fair. All companies – Zambian private or parastatal and foreign owned – must expect to pay more.

The likely outcome of Scott’s remarks far from re-assuring investors will be to halt investment plans until the tax regime is clarified. ZDA’s trumpeted $2b in investment pledges will not materialise. This was poor politics.

 

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