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Taxation and Infrastructure Financing


Taxation and Infrastructure Financing Presentation by Danies K. Chisenda Lusaka, Zambia – PowerPoint PPT presentation

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Title: Taxation and Infrastructure Financing

Taxation and Infrastructure Financing
  • Presentation by
  • Danies K. Chisenda

Lusaka, Zambia
Presentation Outline
  • Introduction
  • Financing for Development
  • Taxation versus Infrastructure Development
  • Some Challenges
  • Conclusion

  • The Zambian Government has approved and launched
    the Vision 2030 and the Fifth National
    Development Plan (FNDP) 2006 - 2010 (Five year
  • Emphasis in the FNDP is mainly on infrastructure
    development due to its pivotal role in supporting
    private sector investment (economic growth).

Introduction (Contd)
  • In order to undertake this development, there is
    need for resource mobilisation both domestically
    and internationally
  • Many big infrastructure projects have largely
    been financed by borrowing from multilateral or
    international institutions.

Introduction (Contd)
  • In Financing the Budget (Resource Mobilisation)
  • Tax revenue
  • Direct taxes - income tax, corporate tax,
    withholding taxes, etc.
  • Indirect taxes - VAT, import taxes, excise
    duties, etc.
  • Non-Tax Revenue
  • Fees, fines, levies and others
  • Grants from cooperating partners
  • Budget Support and project Grants

Introduction (Contd)
  • Domestic financing
  • - Bank and non bank borrowing
  • Foreign financing
  • - Project and programme loans

Introduction (Contd)
  • Spending of Resources (Expenditure)
  • Recurrent Expenditure
  • - Personal emoluments and operations of
  • Capital expenditure
  • - Fixed Assets - Infrastructure (roads,
    railways, dams, building, power stations,
    water supply plants, etc.
  • - Movable Assets - motor vehicles, equipment,

Financing for Development
  • This mainly involves fixed assets
    (Infrastructure). In Zambia, financing for
    infrastructure is by both domestic and foreign
  • Domestic resources not adequate to finance major
    infrastructural projects
  • Hence reliance on foreign borrowing and grants

Financing for Development (Contd)
  • Some new ideas or innovations
  • - Earmarking of some Domestic revenues for
    infrastructure i.e. portion of excise duty
    (fuel levy) for road maintenance, and excise
    duty on electricity also earmarked for rural
  • But resources not adequate.
  • Other alternatives
  • - Public Private Partnership (PPP)
  • BOT (Build Operate Transfer)
  • - Private sector investment
  • - user charges

Taxation versus Infrastructure Development
  • Some questions/Issues
  • Should infrastructure projects be exempt from
  • In practice, infrastructure projects financed by
    co-operating partners are tax exempt.
  • Reasons advanced-
  • - infrastructure projects will be too costly
  • - mainly Government projects, not taxed.

Taxation versus Infrastructure Development
  • Should privately undertaken infrastructure
    projects also be exempt from tax?
  • Tax Exemptions are bad because
  • - distortionary
  • - unfair
  • - reduce revenues/ reduce tax base

Some Challenges
  • Tax policy and administration must be tailored in
    such way that they yield adequate resources to
    Government but must be fair and effective in
    order to promote economic growth.
  • Some problems in tax administration
  • - Transfer pricing, tax sparing, smuggling,
  • non-tax compliance have negative impact
  • on total revenue,

Some Challenges (Contd)
  • Tax exemptions have an effect of shrinking the
    tax base i.e. less revenue to Government.
  • Taxing infrastructure projects financed by
    multilateral institutions or cooperating partners
    may face problems as they may not provide extra
    resources and they will ask recipient country to
    find extra money.
  • User charges as a means of financing may be
    ineffective if services are rendered to the poor.

Some Challenges (Contd)
  • Financing of infrastructure for developing
    countries involves colossal amounts of money,
    hence the multilateral institutions and
    cooperating partners will continue to play an
    important role.
  • The private sector involvement in infrastructure
    financing is very much needed especially in
    sectors that are commercially viable i.e. energy

  • Financing access to basic utilities is a costly
    venture requiring huge amount of resources and
    the challenge for tax policy and administration
    is to mobilise adequate financial resources.
  • The linkage between taxation and infrastructure
    financing is not always direct for developing
    countries because of the pooling of different
    resources in one basket.

  • I thank you for your attention.
  • ___________