The Chairman

NCC, Lusaka

28 July 2010

Dear Sir,

Thank you for the opportunity to comment on the Draft Constitution. I appreciate the complexity of the
Conference’s assignment.

My submission is in four parts.

- in Part A, I comment on the provisions of the National Constitutional Conference Draft Constitution
(NCC DC) that deal with taxation, a field of my interest;
- in Part B, I make a comparison of the main taxation provisions in the current Constitution, the
Mung’omba Draft Constitution (MDC) and the NCC DC;
- in Part C, I briefly comment on other miscellaneous Articles of the NCC DC; and
- in Part D, I make my concluding remarks.

1. Article 65: Right to pension, gratuity and retrenchment benefits

Clause 3 of this Article provides that: “Pension, gratuity and retrenchment benefits in respect of service is
exempt from tax”.

I find this provision to be unreasonable, plausible to abuse and a risk to revenue. In any case, what the
clause is advocating for is, in my view, a tax policy matter that can better be dealt with under a subsidiary
legislation, and not in the Constitution.

Further, the provision is very weak and can easily be undermined by the State itself, if the State happens to
be in serious need of revenue. For example, the Government can decide to tax pension contributions (i.e.
treat contributions as non-deductible for tax purposes) or tax the Pension Funds, or even tax both. By so
doing, the Government would not have breached the constitution. But the result would as good (bad) as
imposing a tax on the pension income itself.

I also wonder what the effect of having such a proviso in the Constitution will be on the country’s
international tax policy. How will similar payments made to non-nationals be treated? The sure way will be
to grant an exemption also, for tax treaties generally do not allow discrimination based on nationality. Now,
would that be desirable?

I find it strange that under Article 249, the NCC deleted Article 285(2) of the MDC which provided that:
“Pension in respect of service in the public service is exempt from tax”. According to the record of the
deliberations on that Article, it was deleted because “most members argued that the provision … would
impact negatively on the capacity of Government to provide adequate public services; …that Government
had no other means of raising revenues apart from taxes;… that such a provision would promote inequality
in the tax regime;... that public service retirees continued, after retirement, to access public services
provided by Government through revenue generated from taxes”. This clearly is a contradiction to what is
being proposed under Art 65(3).

It seems to me that different committees of the NCC came up with different positions on this matter. What
was rejected by one committee under one Article was accepted under a different Article by another
committee. There was no final ‘NCC position’. That is, positions of the committees were not reconciled.

In my view, the MDC proviso that was deleted was better “targeted” than what the NCC DC is proposing.
The exemption in the MDC was “in respect of service in the public service”, while the NCC DC merely
says “in respect of service”, whatever that means. I am not in any way arguing that the MDC proviso was
desirable. It was not; but it surely was much better.

I recommend that Clause 3 of Article 65 be deleted.

2. Article 265: Imposition of tax
(a) While this Article is entitled “imposition of tax”, its Clauses refer to “imposition of taxation”.

Without debating on whether the two terms have the same meaning, I recommend that the latter term be
replaced with the former so as to be consistent with the Article heading and also with other Articles of the
Constitution, such as Article 158. The second reason is that the word “taxes” is defined in Article 308, but
the word “taxation” is not. It is my view that using a defined term would avert some possible future
interpretation problems.

You will note that Article 114 of the current Constitution is entitled “Imposition of taxation”, and it uses
this term in the Clauses that fall under it. Similarly, Article 304 of the MDC entitled “Imposition of tax”
consistently uses this term in its Clauses. The NCC used the heading in the MDC but ‘copied and pasted’
(under it) the Clauses of the current Constitution.

(b) The NCC rejected Clause 2 of Article 304 of the MDC which provided that: “Where legislation…
confers powers on any person or authority to waive or vary a tax imposed by that legislation, that person or
authority shall make a report to the National Assembly on the exercise of those powers as provided by or
under an Act of Parliament”.

The reason advanced is that the Commissioners “…advocated for the exercise of discretion in cases that
required administrative flexibility”.

This argument does not seem valid to me. The deleted proviso was not in any way restricting the
discretionary powers to waive or vary a tax. It merely required that the person who exercises such powers
be accountable to Parliament whenever he/she decides to exercise that discretion.

I recommend that the provision be re-instated. Ito will guarantee some level of fairness and will also
minimize abuse and discrimination. If we do otherwise, we run a serious risk of having a legislative body
rightly imposing taxes, while the Executive “leaks” them away.

(c) It would appear to me that Clause 3 of Article 265 is some sort of “emergency imposition of taxes” - a
Decree Law, so to say. It is empowering the Executive to impose a tax, pending Parliamentary approval.

This Clause will serve no use, other than political appeasement. And indeed from the deliberations of the
NCC, this appears to be the case. The record of the deliberations indicate that “most members …observed
that the role of the President in matters of taxation was important but that Article 304 (of the MDC) did not
provide for it. They, therefore, proposed that the entire Article 304 in the Draft Constitution should be
replaced with Article 114 of the current Constitution”.

The NCC exaggerated the role of the President in taxation. Most countries leave the imposition of taxes in
the hands of the people’s Parliament. We, too, need to start moving away from making all matters of our
country, including taxation, to revolve around the Presidency.

The Clause will serve no major useful purpose other than ambushing taxpayers. By and large, tax laws
should be predictable. Emergencies are not ideal. In any case, to me, this Clause is against the much
endeared principle of "no taxation without representation", which principle Clause 1 of the same Article is
embodying.

How do we hope emergencies will help when we are failing to attend to the inadequacies in our tax laws
during ordinary times (i.e. the normal sitting of Parliament)? Consider the mining taxation law, for
instance. Controversial as it was, we abolished the Windfall Tax with the intention of remaining with the
Variable Tax. But (surprise, surprise), when the Amendment Act finally came out we had abolished even
the Variable Tax. Government sources indicate the deletion was by error. Now, if this truly was an error, it
is an issue that could even have required Parliament to re-convene. It cannot be wished away. Or are we
going to react only when the tax consultants discover (and start feasting on) the 'error'?
I recommend that Clause 3 of Article 265 be deleted. If this view cannot be justified, the Article should be
improved by specifying what would happen to the taxes paid under such a measure if the Bill does not
become law. Will the taxes be refundable or not?

(d) Clause 5 of Article 265 provides that: “Where the Appropriation Act in respect of a financial year has
not come into force at the expiration of six months from the commencement of that financial year, the
operation of any law relating to the collection or recovery of any tax upon any income or profits or any
duty or customs or excise shall be suspended until that Act comes into force…”

It is not clear to me why Value Added Tax (VAT) is not included in the list of taxes mentioned. I suspect
that it is because the proviso was copied from the current Constitution; a Constitution whose provision is,
in turn, a ‘copy and paste’ of the respective Article in the 1991 Constitution. You will recall that in 1991,
VAT had not yet been introduced in Zambia. If my views are correct, you may wish to revise the Clause.

3. Article 308: Definitions

Article 308 provides thus: “In this Constitution, unless the context otherwise requires - ...“taxes” includes
rates, levies, charges, tariffs, tolls and duties”. (Emphasis mine)

Despite this definition, several Articles of the NCC DC still list the types of taxes. Examples include: (a)
Art 33(i) “…all taxes and duties…”; (b) Art 56(c) “…any tax or rate due…”; (c) Art 63(4)(a) “…any tax,
rate or due…”; and (d) Art 63(4)(aa)(ii) “…any duty or tax…”.

Is the listing of specific taxes intended to create a different (‘contextual’) meaning? Is it intended to
categorize the taxes? Absent that intention, I recommend that the listings be avoided and that we instead
use the word “tax” or “taxes”, as appropriate. Alternatively, we may as well do away with the definition.

You will note that the current Constitution does not contain a definition of the word “taxes”; hence the
reason for the framers to attempt to list the taxes in different Articles.

Part B: Comparison of provisions on taxation

Current (1996) Constitution Mungómba Draft NCC Draft Constitution

113. Duties of the citizens
It shall be the duty of every citizen
to –
.....
(h) pay all taxes and duties legally
due and owing to the State;
Constitution
25. Responsibilities of citizen 33. Responsibilities of citizen
A citizen shall – A citizen shall-
.... ....
(g) contribute to the welfare (i) pay all taxes and duties legally
and advancement of the nation due and owing to the State;
by paying all taxes and duties
lawfully due and owing to the
State;
49. Special measures for ...deleted
persons with disabilities
(1) The State shall -
...
(c) not tax any device used by
persons with disability.
65. Right to pension, gratuity and
retrenchment benefits
(1) Every worker has the right to a
pension, gratuity or retrenchment
benefits.
...
(3) Pension, gratuity and

114. Imposition of taxation
(1) Subject to the provisions of this
Article, taxation shall not be
imposed or altered except by or
under an Act of Parliament.
(2) Except as provided by clauses
(3) and (4), Parliament shall not
confer upon any other person or
authority power to impose or to
alter, otherwise than by reduction,
any taxation.
(3) Parliament may make provision
under which the President or the
Vice-President or a Minister may
by order provide that, on or after
the publication of a Bill being a
Bill approved by the President that
it is proposed to introduce into the
National Assembly and providing
for the imposition or alteration of
taxation, such provisions of the
Bill as may be specified in the
order shall, have the force of law
for such period and subject to such
conditions as may be prescribed by
Parliament:
Provided that any such order shall,
unless sooner revoked, cease to
have effect-
(i) if the Bill to which it relates is
not passed within such period from
the date of its first reading in the
National Assembly as may be
prescribed by Parliament;
(ii) if, after the introduction of the
Bill to which it relates, Parliament
is prorogued or the National
Assembly is dissolved;
(iii) if, after the passage of the Bill
to which it relates, the President
refuses his assent thereto; or
(iv) at the expiration of a period of
four months from the date on
which it came into operation or
285. Pension to be reviewed
(1) Pensions shall be reviewed
upwards periodically to take
into account changes in the
value of money or a review of
salaries.
(2) Pension in respect of
service in the public service is
exempt from tax.
304. Imposition of tax
(1) A tax shall not be imposed
except by or under an Act of
Parliament.
(2) Where legislation, enacted
under clause (1), confers
powers on any person or
authority to waive or vary a
tax imposed by that
legislation, that person or
authority shall make a report
to the National Assembly on
the exercise of those powers
as provided by or under an
Act of Parliament.
retrenchment benefits in respect of
service is exempt from tax.
249. Pension, gratuity and
retrenchment benefits for public
officers
Pensions shall be reviewed upwards
periodically to take into account
changes in the value of money or a
review of salaries.
..part (2) deleted
265. Imposition of tax
(1) Subject to the provisions of this
Article, taxation shall not be
imposed or altered except by or
under an Act of Parliament.
(2) Except as provided by clauses
(3) and (4), Parliament shall not
confer upon any other person or
authority power to impose or to
alter, otherwise than by reduction,
any taxation.
(3) Parliament may make provision
under which the President or the
Vice-President or a Minister may
by order provide that, on or after the
publication of a Bill being a Bill
approved by the President that it is
proposed to introduce into the
National Assembly and providing
for the imposition or alteration of
taxation, such provisions of the Bill
as may be specified in the order
shall, have the force of law for such
period and subject to such
conditions as may be prescribed by
Parliament:
Provided that any such order shall,
unless sooner revoked, cease to
have effect -
(a) if the Bill to which it relates is
not passed within such period from
the date of its first reading in the
National Assembly as may be
prescribed by Parliament;
(b) if, after the introduction of the
Bill to which it relates, Parliament
is prorogued or the National
Assembly is dissolved;
(c) if, after the passage of the Bill to
which it relates, the President
refuses to assent to it; or
(d) at the expiration of a period of
three months from the date on
which it came into operation or
such longer period from that date such longer period from that date as
as may be specified in any may be specified in any resolution
resolution passed by the National passed by the National Assembly
Assembly after the Bill to which it after the Bill to which it relates has
relates has been introduced. been introduced.
(4) Parliament may confer upon (4) Parliament may confer upon any
any authority established by law authority established by law for the
for the purposes of local purposes of local government
government power to impose power to impose taxation within the
taxation within the area for which area for which that authority is
that authority is established and to established and to alter taxation so
alter taxation so imposed. imposed.
(5) Where the Appropriation Act (5) Where the Appropriation Act in
in respect of a financial year has respect of a financial year has not
not come into force at the come into force at the expiration of
expiration of six months from the six months from the
commencement of that financial commencement of that financial
year, the operation of any law year, the operation of any law
relating to the collection or relating to the collection or
recovery of any tax upon any recovery of any tax upon any
income or profits or any duty or income or profits or any duty or
customs or excise shall be customs or excise shall be
suspended until that Act comes suspended until that Act comes into
into force: force:
Provided that- Provided that -
(i) in any financial year in which (a) in any financial year in which
the National Assembly stands the National Assembly stands
dissolved at the commencement of dissolved at the commencement of
that year, the period of six months that year, the period of six months
shall begin from the day upon shall begin from the day upon
which the National Assembly first which the National Assembly first
sits following that dissolution sits following that dissolution
instead of from the commencement instead of from the commencement
of the financial year; and of the financial year; and
(ii) the provisions of this clause (b) the provisions of this clause
shall not apply in any financial shall not apply in any financial year
year in which the National in which the National Assembly is
Assembly is dissolved after the dissolved after the laying of
laying of estimates in accordance estimates in accordance with Article
with Article 115 and before the 269 and before the Appropriation
Appropriation by Parliament. by Parliament.

Article 352 : Definitions 308. Definitions

In this Constitution, unless the
context otherwise requires -
...
“taxes” includes rates, levies,
charges, tariffs, tolls and
duties;
In this Constitution, unless the
context otherwise requires -
...
“taxes” includes rates, levies,
charges, tariffs, tolls and duties;

Part C: General comments on other provisions

1. Article 29: Dual citizenship

Clause 1 of Article 29 allowing for dual citizenship for citizens by birth or descent is welcome. I commend
the NCC for approving the Zambian people’s recommendation as reflected in the MDC.
2. Articles 25 and 27 vs. Article 29
Under Articles 25, an individual may apply for Zambian citizenship on account of birth, descent or length
of stay in Zambia. If the application is successful, the applicant is required to renounce his/her citizenship
of any other country. This means that such an individual will strictly be a Zambian citizen (i.e. no dual
citizenship).

It appears to me that if such the individual's application was on account of birth or descent, he/she could
later (or immediately) apply for dual citizenship under Article 29. If this view is correct, what would the
initial 'renouncement' have served?

An individual who acquires Zambian citizenship by length of stay would also have renounced any other
citizenship he/she may hold. such an individual will however not qualify to apply for dual citizenship under
Article 29, as birth or descent are a pre-condition for application. That is, the individual will be ‘strictly’
Zambian, while citizens by birth or descent will have some flexibility. This makes individuals who were
originally not citizens to be more tied up to Zambia than those who have been. It boggles the mind.

Similar arguments can be about Article 27, regarding citizenship by adoption.

Once an individual has become a citizen, aren't they supposed to be treated like any other citizen?

3. Art. 108 (Qualifications of presidential candidate) vs. Art. 62 (Protection of freedom of movement)
Article 108 requires, among others, that “A person shall be qualified to be a candidate for election as
President if that person - …has been ordinarily resident in Zambia for a continuous period of ten years
immediately preceding the election”.

This Article seems to be an impediment to an individual’s freedom of movement, which freedom Article 62
seeks to protect. Surely it would not make sense to have a situation where an individual who has been
working in a private company in Zambia would qualify to stand as a presidential candidate, while another
who has offered length faithful service to his country from outside (say as a diplomat, a spy, etc.) would
not.

If the above reasons aren’t good enough to warrant the deletion of this proviso, we can do so on account of
‘breaking' news: The Professor is no longer in contest!

Part D: Conclusion
Mr. Chairman, the MDC was released in 2005. I estimate that that Review Commission may have started
its work 2 to 3 years prior. We are now in 2010. This project therefore has been long. It has been costly. Let
the final product repay our patience. Let it be a kind that can console us when we finally sit down to
balance our books.

Again, I thank you.

Kennedy Munyandi
International Bureau of Fiscal Documentation
The Netherlands.