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Monday, 21 April 2008

$4bn in taxes?

The Post are reporting that Zambia collected $4bn in taxes last year. Either the author was drunk at the time of writing or Fundanga was drunk when he was being interviewed. I rule out the possibility that both were sober throughout the process. Read more here.

Update (23/04/2008):
Good to see that The Post has now quickly corrected this story.

37 comments:

  1. That's what 1/3 of the GDP ? That sounds high indeed.
    Then again, in my country oil tax revenues are like half of the GDP.

    Can you make sense of this:

    Dr Fundanga said had Lumwana mines helped to develop the Chingola-Solwezi Road, it would not have been in the current poor state.

    "How are we going to repair the roads if they don't pay the tax?" asked Dr Fundanga.


    Did the mines "help" outside of taxation or through taxation ? What's the point of paying taxes if you have to "help" repair roads on top of it ?

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  2. Cho,

    Good to see that The Post has now quickly corrected this story.

    I don't know:

    " as having said that Zambia raised US$4 billion from mine taxes last year. It has come to our attention that close to US$4 billion had been raised in copper revenues."

    Isn't that exactly the same? Taxes are revenues.

    I think the authors are confusing industry turnover (total sales) with taxes. I remember reading that the industry was $4bn worth and that $400 million were raised in taxes.

    Of course, that was a while ago and copper prices have increased since.

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  3. "Isn't that exactly the same? Taxes are revenues" - MrK

    I don't follow this :)

    "Did the mines "help" outside of taxation or through taxation ? What's the point of paying taxes if you have to "help" repair roads on top of it ?" - Random

    Two words come to my mind "externalities" and "redistribution"

    1. Doesn't that depend on whether the tax adequate corrects for "all externalities"?

    2. Could it be that really asking them to "repair" is a form of redistribution?

    25 April 2008 13:47

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  4. "Isn't that exactly the same? Taxes are revenues" - MrK

    I don't follow this :)

    The way I understand it, is that the government revenues are taxes. The Internal Revenue Service is a tax collecting agency.

    What I think The Post is confusing, is the market price for the total number of tonnes sold by the industry ($/ton x number of tonnes, which would over $4bn), with the taxes collected from the mining companies by the government (which would be over about $400mn).

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  5. The $4 billion number may be getting a little outdated.

    From this article, Zambia is to produce 1 million tonnes of copper. The copper price just crossed over $10,000 per tonne.

    Therefore, the entire industry would be worth $10 billion per year, not $4 billion.

    It is hard to get the industry on record with how much profit they actually make. However, back when turnover was $4 billion, Equinox stated that 62% of their turnover was profit. If costs have stayed roughly the same, $1.52bn, let's say $2bn, then they would make about $8bn in profit.

    Another way to calculate how much profit the mining industry makes:

    Back in 2005, the cost per lb was $0,76. One pound is 0.4536 kilo, one tonne is 1000 kilos, and Zambia produces 1 million tonnes of copper.

    So, an estimate of total cost would be ([0.76 : 0.4536] x 1,000 x 1,000,000) or $1.675bn.

    With a total turnover of $10bn, that leaves $8.35bn in profits.

    Collecting $4bn in taxes would not be that bad unrealistic after all.

    I would like to see more data and perhaps evidence that $4bn is going to be collected from the mines.

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  6. Mrk,

    On the revenue / tax issue I think it is the question of perspective. Normally you refer to the size of the industry through "revenue". Of course tax is government revenue as well!

    Anyway, on your other comment. Whats the source for $10k? I have just below $8k from here
    . So by 2010, with the price of commodity expected to rise, we can use the $8k as a very conservative

    Unfortunately, we have not seen how the government has calculated that based on 600k tonnes of copper, Zambia will get an additional $415m. I questioned the ambiguity of this "additional" figure in a previous blog The State Vs Mining Companies? (Part 1- Opening Shots)

    I note there that Zambia currently gets $115m. If $415m is additional in the real sense then we are expectibe $565m this year (when the mines will have (4.8bn)- this is equivalent to 12% of revenues. In 2010 we would expect $1bn or thereabouts. But if revenue to the mines is $8bn, then it means we are not doing well!

    I have struggled to square this with the mining companies who claim government are effectively increasing taxes to 47% of revenue. See here.

    That would suggest that Zambia will earn nearly $2bn this year.

    Someone is not telling the truth. The government has never released the calculations. All we have is claims and counter claims.

    Have you looked into this?

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  7. Two words come to my mind "externalities" and "redistribution"

1. Doesn't that depend on whether the tax adequate corrects for "all externalities"?

2. Could it be that really asking them to "repair" is a form of redistribution?

    On #1, why not have a tax for that ? A gasoline tax for instance that will finance roads.. or something else, but specific. Because as it stands this is non-tax taxation.

    on #2, once again, why outside of taxation ?

    The thing is, the non-tax taxation delegitimizes taxation in general. At least, raising taxes has an "official" and egalitarian stamp to it. This both reinforces the idea that they're paying taxes for nothing and that they're the only ones being taxed for actual services.

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  8. Random,

    If I was going to play the role of a zealous prosecutor for the govt, I would probably reason as follows:

    On externalities. I think in an ideal world you want to ensure that EVERY activity pays for its external cost. That is not possible with a generic tax like the one you have suggested.

    The other point is that imposing an environmental tax and then using it to fund a road that increases consumption of that activity is dishonest I think! Revenue from environmental taxes should be used to further mitigate environmental damage e.g. through investing in technology etc.

    On redistribution. Again the tax may be too generic. Possibly redistributing too much from other quarters. Arbitrary asking them to immediately fund something specific brings a bit of flexibility to who they want to redistribute from.

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  9. Ok, that's if you were playing play the role of a zealous prosecutor for the government.
    What about your opinion as an independent economist ?

    Arbitrary asking them to immediately fund something specific brings a bit of flexibility to who they want to redistribute from

    But that's exactly the issue. It's unfair. Generic taxation of profit or by activity is designed to tax all agents proportionally to their profit or consumption or whatever. This only means that the government chooses to tax some people and not others which can lead to pretty nasty political stuff.

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  10. Cho,

    I'm sorry, the $10,000 per tonne was a bit premature. However, it is just below $9,000 right now, an all time high, and with rising oil prices, I wouldn't be surprised if it hit $10,000 within a few months.

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  11. Random,

    I think as you have rightly pointed out, its a balancing act..between developing an EFFICIENT tax system and our that is FAIR...

    Its probably easier to determine what an efficient tax looks like, but fair taxes are matter of debate.

    My personal view is that the rationale for specific taxes need to be clear. Mining companies for example pay the following taxes:

    - Royalty Tax
    - Windfall Tax
    - Company Tax
    - Custom Duties
    - Road Levy
    - Income Tax

    And the imployees I think pay Pay As You Earn (personal income tax).

    Now Royalty, Windfall and Income taxes seem to be just taxes for being in the country and taking our copper. We are the owners, but we lend it to the mining companies, so we tax them as some form of interest!

    Company Tax is just a tax for doing business!

    Custom duty is just a duty for engaging in trade activities!

    Now Road levy is questionable if you are also asking them to build roads! The same argument is normally applied to road pricing in Europe. Why pay a congestion charge and then pay road tax?

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  12. MrK,

    Noted. I had the same graph (see previous comment to you) but for some reason I read it as "below $8k"..Quite right its above $8k.

    Are you able to offer any thoughts on my previous comment to you vis-a-vis the discrepancy between the government estimates and the Mining companies view. Can we expect $2bn or $0.5bn this year? And why is no one in the opposition asking these questions?

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  13. Now Road levy is questionable if you are also asking them to build roads! The same argument is normally applied to road pricing in Europe. Why pay a congestion charge and then pay road tax?

    Well, the road tax is a tax that finances the road system, from which everybody benefits directly or indirectly. Now congestion pricing is added to that to limit use of certin roads or to pay for extra costs generated by certain roads. (and let's not forget the fact that some of these roads are privately managed, which implies that no road tax fund is going towards them). That's quite different from asking some users and only some users to finance free and open roads.

    But back to fairness, I think you misunderstood my argument. It wasn't about the fairness of the existence of some taxes but the fairness in the collection.

    To make it simple, congestion pricing collects revenue from users, proportionally to use. You don't use that road, you don't pay it. You use it, you pay for it, no matter who you are.
    Road taxes usually are designed the same way, taxing fuel is a proxy for taxing use. Taxing car ownership is a more imperfect proxy for use but still one.
    The thing is when mining companies are asked to build roads, they're the only ones asked and we don't exactly know on which basis it's divided between them.
    Now we had part of this discussion before, and you said that mining companies are the ones using the roads anyway. That's probably true but is it fair that other companies using the roads too don't have to pay for them ? Or that a mining company using more would pay as much as another one ?
    That's what I meant by fairness and I do think that a fair tax collection system has to be somewhat proportional (it could progressive too) to the use. After all, if the road levy is proportional to fuel consumption or to road use, minign companies will still pay most of it. But in a fair way.

    Of course, one can be like MrK :-) and make up all sorts of reasons why mining companies or this or that specific business should be taxed more, but then again, that's what the Royalty and Windfall taxes already do, right ? So once again, does non-tax taxation make any economical sense ?

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  14. Cho,

    Noted. I had the same graph (see previous comment to you) but for some reason I read it as "below $8k"..Quite right its above $8k.

    And it dipped below $8k just a month ago. Copper prices are moving pretty quickly.

    Are you able to offer any thoughts on my previous comment to you vis-a-vis the discrepancy between the government estimates and the Mining companies view. Can we expect $2bn or $0.5bn this year? And why is no one in the opposition asking these questions?

    Which was the same back when everyone was discussing whether the mines should be taxed at all. Their silence and lack of interest is deafening and suspicious.

    Let's say the average price for the year has been $7500 per tonne, and the cost is still $1.67 or to round it off and be conservative, $2bn. At 1 million tonnes, turnover would be 7.5 billion and profits would be $5.5 billion.

    That would put collectable taxes a lot closer to (or above) $2 billion than $0.5 billion.


    Random,

    What are you talking about?

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  15. Oh in another reply you said something like "i think mining companies should be taxed more and indigenous business less if at all". I guess I was taking a cheap shot or something. Not that it's very relevant to this conversation.

    I'm still more interested in discussing the fairness of the collection.

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  16. MrK,

    "Let's say the average price for the year has been $7500 per tonne, and the cost is still $1.67 or to round it off and be conservative, $2bn. At 1 million tonnes, turnover would be 7.5 billion and profits would be $5.5 billion."

    I don't understand why you are netting off the costs. The new tax framework is a REVENUE tax rather a PROFIT tax. See for example this comment from Sata. Also the blog important new bills

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  17. Random,

    "Now congestion pricing is added to that to limit use of certin roads or to pay for extra costs generated by certain roads.....That's quite different from asking some users and only some users to finance free and open roads."

    Your assessment ignores the larger revenues that come from road price given the inelasticity of car travel. Most road pricing mechanism are simply revenue raising ventures. The question is what should be done with the billions revenue. Clearly investing in more capacity and public transport. Basically the road tax is simply used as proxy for road pricing. There's no case for having both.

    "But back to fairness, I think you misunderstood my argument. It wasn't about the fairness of the existence of some taxes but the fairness in the collection."

    The two aren't different actually. Most taxes have an inherent collection constraint within them. In other words, the tax itself imposes constraints on who it can be collected from. So the fairness of the existence of the tax isn't alwayss divorced from the collection mechanism. But I get your main point.

    So on your point about fairness. I the problem is actually what you mean by "fair". You are narrowing fairness down to the principle of "compensation" or "proportionality". What about other aspects of fairness e.g. exogenous rights (local people could argue its unfair for them to pay for roads, when its their land), or fitness (who ever makes best use or rather most use of the roads should pay for them)?

    The issue of fairness really is about equity and what society believes to be the fair division of such burdens to achieve broader collective welfare.

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  18. Your assessment ignores the larger revenues that come from road price given the inelasticity of car travel. Most road pricing mechanism are simply revenue raising ventures.

    Really ?
    I guess it depends on what we're talking about. Road Tax (usually collected through fuel taxes) or toll roads ?
    As far as I know, except in a few loony places (like my country actually), toll roads or even congestion pricing doesn't exist without alternatives (road or public transport). What one pays for is the right to get in London with a car (and not the tube) or to use a highway in France (and not a national road).


    The question is what should be done with the billions revenue. Clearly investing in more capacity and public transport. Basically the road tax is simply used as proxy for road pricing. There's no case for having both.

    Isn't it what is done usually ?
    But furthermore, toll roads are usually self-financed. Whether they're privately owned or not, the road tax fund don't cover their costs. And even beyond that, the point quite often is to finance infrastructure only few people want and need by making those that need it pay for it.

    The two aren't different actually. Most taxes have an inherent collection constraint within them. In other words, the tax itself imposes constraints on who it can be collected from. So the fairness of the existence of the tax isn't alwayss divorced from the collection mechanism.

    Of course. But here we're discussing how two different forms of collection for the same tax generate different issues.

    So on your point about fairness. I the problem is actually what you mean by "fair". You are narrowing fairness down to the principle of "compensation" or "proportionality". What about other aspects of fairness e.g. exogenous rights (local people could argue its unfair for them to pay for roads, when its their land), or fitness (who ever makes best use or rather most use of the roads should pay for them)?

    That's dodge.
    If the point is compensate for "foreignness", then why not having a license/tax on foreign businesses ? If the point is fitness, then, well, let's define what best use means (it could mean different rates for different types of vehicules).
    I think all in all, the point is that in order to argue that a type of business or a type of person needs to pay more, one should create universal rules. Most likely they will fit but at least it won't be so damn subjective. To give an example, it's the difference between making people pay a certain income tax rate when they're in a certain bracket of income and making people perceived as rich paying more taxes. For the most part, it will be the same people but at least with the income tax, you have an objective standard.

    The issue of fairness really is about equity and what society believes to be the fair division of such burdens to achieve broader collective welfare.

    I don't understand this relativism, at all. And this kinda connects to part of our debate about indegenous institutions.
    Societies can have wrong or biased perceptions of what is fair. And those perceptions can be easily be manipulated for the worse.
    To make it simple, the debate here is whether setting up a universal standard is or not preferable to leave the definition to society and the politicians who define it. To make it simple, society may think that taxing poorer people who are not indegenous to that part of the country for roads is fair or society may think that women ought to be taxed more or society may be used to make politically-connected businesses avoid contributing..

    So once again, I believe setting standards for taxation not only is fair (because it's objectively measured) but is also much more efficient (predictability and so on).

    Now defining the standards (what has to be taxed) is a subjective issue but I don't see what would be lost by not subjectively defining who has to be taxed outside of the loss for politicians and the politically-connected businesses.

    Oh and perception matters. If there is a thing that creates the perception of corruption, unfair taxation and favoritism, it's non-tax taxation, because even if it happens to be allign with what objective taxation would be, it's seen as subjective. And that breeds resentlement.

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  19. Random,

    " I guess it depends on what we're talking about. Road Tax (usually collected through fuel taxes) or toll roads ? As far as I know, except in a few loony places (like my country actually), toll roads or even congestion pricing doesn't exist without alternatives (road or public transport). What one pays for is the right to get in London with a car (and not the tube) or to use a highway in France (and not a national road)."

    Its not that simple. The incentive to switch across to public transport depends on a whole host of things including distance travel, when people need to travel and so forth. Also there are institutional issues e.g. the ability of public transport providers to respond to demand over time, political acceptability of variable charges over time, etc.
    If you take the London Congestion charge for example, we have already seen that traffic is now back to its original levels. After the initial shock, people have adjusted to the charge and now willing to pay it. More money for the mayor, but zero for environment.

    "I think all in all, the point is that in order to argue that a type of business or a type of person needs to pay more, one should create universal rules. "

    This is the key and we are in agreement. But your earlier point was trying to define what those universal rules SHOULD be. You have to argue why you think that an approach based on "equal burden" is intellectually superior to other approaches that define define fairness on "unequal shares" e.g. exogenous rights, fitness or reward.


    "I don't understand this relativism, at all. And this kinda connects to part of our debate about indegenous institutions."

    I also despise relativism, but that is "post modernism" thinking for you! Everyone has abandoned absolute truth thanks to the enlightment movement of 18th / 19th century Europe. Economics is no exception. Many of Sen's writings are based on a view of society that is indeterminate.

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  20. The incentive to switch across to public transport depends on a whole host of things including distance travel, when people need to travel and so forth. Also there are institutional issues e.g. the ability of public transport providers to respond to demand over time, political acceptability of variable charges over time, etc.

    Sure, but alternatives exist whether they're less convinient or officient, they still exist.

    If you take the London Congestion charge for example, we have already seen that traffic is now back to its original levels. After the initial shock, people have adjusted to the charge and now willing to pay it. More money for the mayor, but zero for environment.

    I thought the revenue went to public transportation which by definition is more environementally friendly.
    But once again, the London Congestion Charge is different from usual road fees in the sense that it's designed with environemental goals. I don't see this example is relevant when one tries to argue that road tax and road fees are double-taxation.

    This is the key and we are in agreement. But your earlier point was trying to define what those universal rules SHOULD be. You have to argue why you think that an approach based on "equal burden" is intellectually superior to other approaches that define define fairness on "unequal shares" e.g. exogenous rights, fitness or reward.

    No that wasn't what i was arguing. My point was that non-tax taxation (asking mining companies to help) is subjective and is not subject to any measurable or universal rules.
    I've argued before in favour of taxing different types of vehicules at different rates or taxing by weight on top of taxing by gas consumption. That is an example of designing rules with a goal in mind. Deciding without proof that mining companies should be the only ones taking the burden is not. (especially since it would be pretty damn hard to determine how the burden would be divided between mining companies).

    I also despise relativism, but that is "post modernism" thinking for you! Everyone has abandoned absolute truth thanks to the enlightment movement of 18th / 19th century Europe. Economics is no exception. Many of Sen's writings are based on a view of society that is indeterminate.

    I'm not sure I get this.
    I thought the enlightment was preceisely about creating universal rules and principles and getting rid of a world in which priviledged class (clergy, aristocrats) had all the benefits while the burden was on the underpriviledged (peasants, slaves, workers) ?
    Post-modernism is a reaction to the (real or perceived) excess of enlightement/modernism.

    Furthermore, I've rarely seen this debate in economics. The biggest argument for taking subjective elements into consideration to define fairness is about taking the real world and its history, politics, sociology into consideration.

    That is fine, but I don't see why anyone would argue against objectivity in taxation.


    Oh and exogenous rights are a slipery slope, the kind that made us miss the point in the past 50 years. Owning the land as a nation doesn't build roads. Someone has to actually build them and they have a cost. There's no moral reasons why the people who will benefit from them wouldn't pay for them (there are plenty of other reason: for instance if they can't pay, well they can't pay, but they have to prove they can't pay).

    You know what they say about representation without taxation.

    BTW: have you got around to reading Rodrik's book ? We should discuss it one of these days.

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  21. ”Sure, but alternatives exist whether they're less convinient or officient, they still exist.”
    Alternatives only become alternatives if they are credible. Mere “existence” does not mean they are alternatives.

    ”But once again, the London Congestion Charge is different from usual road fees in the sense that it's designed with environemental goals.”

    What exactly makes you reach that conclusion? A regime focused on environmental goes ensures that emissions from vehicle do not increase. It seeks to completely price people off the road. The London Congestion Charge does not do that. In any case I don’t agree with the principle of charges that seek to do that anyway. Once we have priced in externalities, there’s no case for having a charge that eliminates people’s choice to drive as they please.

    ”No that wasn't what i was arguing. My point was that non-tax taxation (asking mining companies to help) is subjective and is not subject to any measurable or universal rules.”

    I think you mean to say “non-taxation as currently applied in many African states is subjective”. I agree, rules are desirable. This is why I have argued for a framework that takes this into account. But I don’t accept that developer contributions per se need be subjective. What needs to be explained is the rationale for developer contributions and where they would be applied. In the many western countries that framework exists and developers are more certain of its rationale. The problem is that in Africa that’s not the case, so it appears arbitrary. In short I think Fundanga has got the right idea, but his approach to implementation is too subjective, and therefore necessarily flawed.

    ”I thought the enlightenment was precisely about creating universal rules and principles and getting rid of a world in which privileged class (clergy, aristocrats) had all the benefits while the burden was on the underpriviledged (peasants, slaves, workers) ? Post-modernism is a reaction to the (real or perceived) excess of enlightement/modernism.”
    Quite. I see post-modernism and enlightenment as father and son. Its true that post-modernism is a reaction to modernism, but modernism began the process of abandoning absolute truths, atleast as they were understood at the time.

    ”Oh and exogenous rights are a slipery slope, the kind that made us miss the point in the past 50 years. Owning the land as a nation doesn't build roads. Someone has to actually build them and they have a cost. “
    Of course every definition of fairness as its flaws, but the concept of “exogenous rights” is perfectly understood. The point is not whether it is acceptable to you or me, but rather that it has some basis morally.

    ”have you got around to reading Rodrik's book ? We should discuss it one of these days.”
    I am re-reading Gregory Clark’s incredible book [Farewell to Alms]. Once I finish it in the next two weeks, I’ll turn to Rodrik’s book. Yes’ll it would be good to discuss it. I have seen couple of reviews on it, which are extremely positive.

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  22. Alternatives only become alternatives if they are credible. Mere “existence” does not mean they are alternatives.

    Well, it all depends on what makes the alternative less credible, doesn't it ?
    I fail to see how people's subgective preference for an unefficient mode of transportation that create externalities on everyone and that is in fact subsidized or their failure to adjust to a system makes the alternatives not credible.

    ”But once again, the London Congestion Charge is different from usual road fees in the sense that it's designed with environemental goals.” 

What exactly makes you reach that conclusion?

    The fact that usually road pricing is designed to actually finance the road in question (cost of building and/or maintenance).
    You know private highways, private tunnels, private bridges etc..
    The London Congestion Charge is an exception, as people in fact pay for something very different.

    A regime focused on environmental goes ensures that emissions from vehicle do not increase. It seeks to completely price people off the road. The London Congestion Charge does not do that. In any case I don’t agree with the principle of charges that seek to do that anyway. Once we have priced in externalities, there’s no case for having a charge that eliminates people’s choice to drive as they please.

    And how exactly do you price in externalities ?
    I mean, isn't that what the congestion charge is doing ? Or should the people's choice to drive as they please not be restricted by those externalities ?

    I think you mean to say “non-taxation as currently applied in many African states is subjective”. I agree, rules are desirable. This is why I have argued for a framework that takes this into account. But I don’t accept that developer contributions per se need be subjective. What needs to be explained is the rationale for developer contributions and where they would be applied. In the many western countries that framework exists and developers are more certain of its rationale. The problem is that in Africa that’s not the case, so it appears arbitrary. In short I think Fundanga has got the right idea, but his approach to implementation is too subjective, and therefore necessarily flawed. 


    Come on, it's not a matter of rationale. The rationale you use is not different from the ones used all over Africa: those companies have to pay for everything because the "people" think it's fair.
    That is subjective in itself.
    What would be not-arbitrary would be a framework that taxes something measurable, be it revenue, road use, gas consumption or whatever.
    The only reason those are not done is because governments actually want to mantain the subjective nature of the system. There has to be reasons why "friendly" companies are exempt.

    I'm not exactly sure about what you mean by "develloper contribution" and the framework in which they exist. Can I have examples ?

    Quite. I see post-modernism and enlightenment as father and son. Its true that post-modernism is a reaction to modernism, but modernism began the process of abandoning absolute truths, atleast as they were understood at the time.

    I'd be very curious to hear which absolute truth were abandoned because of enlightment. Is it the fact that some men are born superior to others ? Is it the fact that knowledge is all revealled and scientific enquiry is blasphamous ?

    What is weird here is that the enlightenment did not abandon absolute truths, they replaced them, and in my opinion with much better ones. Silly little things like "men are born free and equal" or "government by the people, for the people", etc..

    I am re-reading Gregory Clark’s incredible book [Farewell to Alms]. Once I finish it in the next two weeks, I’ll turn to Rodrik’s book. Yes’ll it would be good to discuss it. I have seen couple of reviews on it, which are extremely positive.

    Do you actually like that book ?
    I have only read a few reviews here and there and a few papers (that ended up being chapters) and between the social darwinist conclusion and a few illogical arguments, I put it in my mental "crank" category.

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  23. ”And how exactly do you price in externalities ? I mean, isn't that what the congestion charge is doing ? Or should the people's choice to drive as they please not be restricted by those externalities ?”

    Yes the congestion charge does try to price in externalities, but that does not necessarily achieve “environmental goals”. I guess the confusion might be on what we mean by “environmental goals”. Most environmental see this as no emissions growth period. My point is that if that is the aim then the congestion charge does not deliver that.

    ”Come on, it's not a matter of rationale. The rationale you use is not different from the ones used all over Africa: those companies have to pay for everything because the "people" think it's fair.”

    I disagree. My rationale for “non-taxation” is that the national tax is imprecise and a local form of non-taxation better prices in the externalities so to speak.

    ”I'm not exactly sure about what you mean by "developer contribution" and the framework in which they exist. Can I have examples ?”

    Non taxation we normally call it “developer contributions” in the UK. The UK has a generic model for getting developers to contribute to local infrastructure as the local and national planning authorities sees fit. The model is based on Section 106 of the Town and Planning Country Act (1995). Similar legislation S278 of the Highways Act 1980, deals with trunk roads. This UK legislation basically makes it a condition that any new investment in any local area of the UK should be conditional on providing some minimum level of investment in schools, housing, transport and other things, if the Local Authority deems necessary. What you can basically say is that if a firm X invests in area Y the people in area Y can require that firm X to deliver not just investment but some houses and schools as well. The advantage of such a system is that not only does it relieve pressure on local resources (meeting the "internalisation of “externality” condition), but also helps tackle local poverty by linking the investment to the local needs such as housing. In Zambia, I have argued that such a generic framework, as well as helping us with funding our housing shortage needs, this system has an added advantage that it makes foreign investment in some areas publicly acceptable. Governments wants foreign direct investment, the people simply want good houses and better schools. And of course from an economic perspective such a framework also helps to raise the costs of reneging by the new investor by making it that much costly for him/her to cut and run, like others have done in the past!

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  24. 
Yes the congestion charge does try to price in externalities, but that does not necessarily achieve “environmental goals”. I guess the confusion might be on what we mean by “environmental goals”. Most environmental see this as no emissions growth period. My point is that if that is the aim then the congestion charge does not deliver that. 


    I don't follow what happens in the UK to have any opinion on what it delivered or not, so I'll take your word for it.

    ”Come on, it's not a matter of rationale. The rationale you use is not different from the ones used all over Africa: those companies have to pay for everything because the "people" think it's fair.”

I disagree. My rationale for “non-taxation” is that the national tax is imprecise and a local form of non-taxation better prices in the externalities so to speak.

    Assuming there are local externalities that should be priced, why wouldn't local taxes do that ?
    I mean once again, the problem with "non-tax taxation" is that it's a great way for corrupt politicians to build an un-even playing field.

    Non taxation we normally call it “developer contributions” in the UK. The UK has a generic model for getting developers to contribute to local infrastructure as the local and national planning authorities sees fit. The model is based on Section 106 of the Town and Planning Country Act (1995). Similar legislation S278 of the Highways Act 1980, deals with trunk roads. This UK legislation basically makes it a condition that any new investment in any local area of the UK should be conditional on providing some minimum level of investment in schools, housing, transport and other things, if the Local Authority deems necessary.

    But wait, isn't it more or less restricted to devellopers ? Isn't it done to not add aditionnal pressures to local infrastructure ?

    What you can basically say is that if a firm X invests in area Y the people in area Y can require that firm X to deliver not just investment but some houses and schools as well. The advantage of such a system is that not only does it relieve pressure on local resources (meeting the "internalisation of “externality” condition), but also helps tackle local poverty by linking the investment to the local needs such as housing. In Zambia, I have argued that such a generic framework, as well as helping us with funding our housing shortage needs, this system has an added advantage that it makes foreign investment in some areas publicly acceptable. Governments wants foreign direct investment, the people simply want good houses and better schools. And of course from an economic perspective such a framework also helps to raise the costs of reneging by the new investor by making it that much costly for him/her to cut and run, like others have done in the past!


    See, my issue is that I don't understand what the role of public services and the government is in all that.
    People and companies pay taxes and then, some companies have to provide roads, housing and schools on top of that ?

    I fundamentally disagree with the sentence "governments want foreign direct investment" for reasons that you can guess.

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  25. "Assuming there are local externalities that should be priced, why wouldn't local taxes do that ?
    I mean once again, the problem with "non-tax taxation" is that it's a great way for corrupt politicians to build an un-even playing field."


    Non-taxation is a form of taxation! The difference is that "developer contributions" can be more tailored for a specific issue. Local taxes are too generic. This is the point. With developer contributions the local authority sets thresholds and then when the developer brings forward a developer, they engage in negotiations etc. I do think you are correct that local taxes could move us towards the same goal, but they are more approximate than developer contributions. Incidentally, they are also susceptible to corruption charges etc. As we have discussed any form of fiscal decentralised mechanism always leaves the possibility of some corrupt official usurping the finances! Where I think you might have a point is if you said "local taxes" may be more transparent. But that is simply an issue of "rules" under the non-taxation framework. The system can be equally transparent.

    I mentioned the "negotiating" element. That is something the "local taxes" would not have. Probably you can argue that if developers where to negotiate with locals they might overwhelm them or even buy off the officials, something that might not happen if a "local tax" was in place. But I am not necessarily sure that would be the case.

    I think both systems have pros and cons and it is simply a case of finding the right trade-offs.

    "But wait, isn't it more or less restricted to devellopers ? Isn't it done to not add aditionnal pressures to local infrastructure ?"

    developers / local investors. Yes it is a system designed to deliver something I have recently coined "nil-detriment" on existing local users.

    "See, my issue is that I don't understand what the role of public services and the government is in all that. People and companies pay taxes and then, some companies have to provide roads, housing and schools on top of that ?"

    I think you real issue is that you fundamentally believe the tax system can adequately correct for ALL externalities etc. I am more sceptical of that.

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  26. Non-taxation is a form of taxation! The difference is that "developer contributions" can be more tailored for a specific issue. Local taxes are too generic.

    I know Non-tax taxation is a form of taxation. However, I don't believe the purpose is to tailor it to a specific issue but rather to tailor to a specific payer.
    As I said before, why not tax the externality itself ?

    I do think you are correct that local taxes could move us towards the same goal, but they are more approximate than developer contributions. Incidentally, they are also susceptible to corruption charges etc. As we have discussed any form of fiscal decentralised mechanism always leaves the possibility of some corrupt official usurping the finances!

    It's not only this sort of corruption that I have in mind.
    What I have in mind is the authorities creating an uneven playing field between companies.
    If for instance, the externality created by mines is road congestion, in a system that doesn't tax their road or gas consumption, it's easy for the government or the local authorities to "evaluate" that this friendly mine doesn't need to contribute more or that this one they don't like needs to.

    Where I think you might have a point is if you said "local taxes" may be more transparent. But that is simply an issue of "rules" under the non-taxation framework. The system can be equally transparent.

    You know that's not true.
    The more complicated a framework is, the more criteria it involves, the less transparent it is and that's without anyone trying to not make it transparent.

    I think you real issue is that you fundamentally believe the tax system can adequately correct for ALL externalities etc. I am more sceptical of that.

    No, I fundamentally believe the tax system SHOULD adequately correct most externalities.
    I also believe negative externalities themselves should be taxed, no matter who generates them.

    So yeah, I really don't see why only one type of company should pay for roads. I don't see why the government should ask some companies to "help" after it collected taxes instead of creating taxes for that purpose.
    I also believe in clarity and objective measurement of things.

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  27. ”I know Non-tax taxation is a form of taxation. However, I don't believe the purpose is to tailor it to a specific issue but rather to tailor to a specific payer. As I said before, why not tax the externality itself ?”

    I don’t follow. You may need to explain your point further. The way I see it is that we need to correct externalities. That process involves identifying actors. That’s how taxes. If someone builds a mine and that mine generates additional employment which leads to greater demand for schools. The best way is ensure that the mine pays for the additional schools. That is the “polluter pays principle”. Are suggesting that the best way is to make sure that we charge all the people using the schools? That would penalise everyone including existing users.

    ”It's not only this sort of corruption that I have in mind. What I have in mind is the authorities creating an uneven playing field between companies. If for instance, the externality created by mines is road congestion, in a system that doesn't tax their road or gas consumption, it's easy for the government or the local authorities to "evaluate" that this friendly mine doesn't need to contribute more or that this one they don't like needs to..”

    But that can happen with local taxes. Corrupt officials can offer tax rebates to people they like! Zambians have learnt well on this issue after the mining tax fiasco. Through complicated mining agreements, the mining companies where being taxed, but they got all the money back through various rebate requirements.

    ”You know that's not true. The more complicated a framework is, the more criteria it involves, the less transparent it is and that's without anyone trying to not make it transparent.”

    I agree transparency is the key. It is critical for firms to have some certainty over how much they’ll pay. I am sure a mechanism on developer contributions can be just as simple. Where I think, again, you might have a point, is on the question of “multiplicity”. I think if each local area applied different mechanisms then we might have a problem. Clearly the aim is to have a nationally applied generic system that is understood by everyone, but which allows for some inherent flexibility on the part of the local authority. Incidentally the question of “multiplicity” is also problematic for local taxes in general.

    ”I also believe negative externalities themselves should be taxed, no matter who generates them.”

    I think “scale” of the external detriment is important. Not every externality is worth the effort. There’s a big difference between increasing local traffic by 1% and increasing it by 10%.

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  28. First of all, this is the first time I hear additional employment being described as an externality. I mean, no spill-overs ? no increased social welfare ?

    I don’t follow. You may need to explain your point further. The way I see it is that we need to correct externalities. That process involves identifying actors. That’s how taxes. If someone builds a mine and that mine generates additional employment which leads to greater demand for schools. The best way is ensure that the mine pays for the additional schools. That is the “polluter pays principle”. Are suggesting that the best way is to make sure that we charge all the people using the schools? That would penalise everyone including existing users.

    Like I said the employment/school thing confuses me and I don't know how the schools are currently financed in Zambia anyway. So let me start with a more forward example:

    Roads. Mines moves in, additional traffic, leads to congestion, higher maintenance costs, need to build more roads etc.. Now you'd suggest that making the mine directly pay for it is the better solution. My suggestion is to tax the externality itself (congestion, pollution, road maintenance etc..) by having a collection system more or less proportional to road use (through taxing fuel or pricing roads or even only pricing trucks and letting other vehicules go as they please). In reality, the mining company will be taxed just as much but at least the system will be much more straightforward as they'll be no need for constant re-evaluations and calculations and the externality will actually be taxed, no matter who creates it .

    Same for the school. Whether they're financed directly by the users (school fees) or through local or national taxes, I fail to see how the existing people would be penalised. After all, the mine by generating employment added income in the area. Income that can be taxed, income that will be spent.
    Furthermore, it is not the mine that create the externality in this case, it's the mine workers who decide to move their families. And beyond that, what is the tax income thus created supposed to do if it's not to pay for schools and stuff ?

    But that can happen with local taxes. Corrupt officials can offer tax rebates to people they like! Zambians have learnt well on this issue after the mining tax fiasco. Through complicated mining agreements, the mining companies where being taxed, but they got all the money back through various rebate requirements.

    Exactly. You actually need to give them a rebate, which is an action easier to follow.
    Zambians (and foreigners) are shocked by the idea that the mines actually paid less taxes than the rest of the businesses in Zambia.

    With non-tax taxation, it's quite hard to prove unfair treatment or priviledged treatment as the contribution of the actors has great variation. The default mode is "no contribution" for all businesses and contributions are made after the government estimates following complex calculations that they need to be made.

    But yeah, there is a DA scandal while corruption in the 70's and 80's led to suspicions but no outright falsifiable scandal.

    I agree transparency is the key. It is critical for firms to have some certainty over how much they’ll pay. I am sure a mechanism on developer contributions can be just as simple. Where I think, again, you might have a point, is on the question of “multiplicity”. I think if each local area applied different mechanisms then we might have a problem. Clearly the aim is to have a nationally applied generic system that is understood by everyone, but which allows for some inherent flexibility on the part of the local authority. Incidentally the question of “multiplicity” is also problematic for local taxes in general.

    Yes "multiplicity" is an issue but not as big as "clarity". for reasons I just explained.

    ”I also believe negative externalities themselves should be taxed, no matter who generates them.”

I think “scale” of the external detriment is important. Not every externality is worth the effort. There’s a big difference between increasing local traffic by 1% and increasing it by 10%.

    From the road standpoint, or rather the road administration standpoint, there's no difference if 10 people increased the traffic by 1% each or if 1 person increased it by 10% by itself. The road will need as much maintenance, repairs, the capacity will need to be increased by the same amount, the congestion will be the same.
    So while it may be convinient to only try to price big increases (which i'm not sure about, as there are ways to have some level of proportionality), if the goal is to price the externality, it would be quite unefficient as accumulated small increases would be ignored.

    I guess there is an argument to be made about sudden and predictable big increases and liquidity issues local authorities may have (mines moves in, needs a bigger road, but needs it before it has used it and town can't pay for it right away). But they can be resolved by having the investor pre-pay for the increases in a way. So that it's still the externality that is taxed, only with different time scales which allows a clear, simple and stable system to remain in place.

    ReplyDelete
  29. "First of all, this is the first time I hear additional employment being described as an externality. I mean, no spill-overs ? no increased social welfare ?"

    Additional employment is an externality - a positive externality :)
    Anyway, on your substantial point. I accept that when a mine creates in employment it creates "wider economic" benefits or rather benefits to local economic, not just directly but indirectly through catalytic employment and so forth. The additionality of such employment always depends on excess capacity in the local area. I think the point I was trying to make was that in an ideal world, having considered known "positives" such "wider economic benefits", we need to ensure that the "negatives" impacts on local services are rightly internalised. I don't think you actually disagree with this. Isn't the discussion about how best to "internalise" these things, and whether the "developer contributions" have a role to play?

    "Roads. Mines moves in, additional traffic, leads to congestion, higher maintenance costs, need to build more roads etc.. Now you'd suggest that making the mine directly pay for it is the better solution. My suggestion is to tax the externality itself (congestion, pollution, road maintenance etc..) by having a collection system more or less proportional to road use (through taxing fuel or pricing roads or even only pricing trucks and letting other vehicules go as they please). In reality, the mining company will be taxed just as much but at least the system will be much more straightforward as they'll be no need for constant re-evaluations and calculations and the externality will actually be taxed, no matter who creates it ."

    But how would you make sure you tax the additional externality, without increasing the burden on existing users? Or do you not care that you would be asking the existing users to pay twice? They first paid for the road to be built and now along comes the mine with its increased demand and now you asking them to contribute again? I am more interested it the first question :)

    "Exactly. You actually need to give them a rebate, which is an action easier to follow."

    No! I was saying that your system allows for the possibility of corruption through rebates!
    I assume that rebates are now the answer to the question I have asked above? :) If so, I would be interested to know how that can work at the local level?

    "Yes "multiplicity" is an issue but not as big as "clarity". "

    Not if you Spanish. Multiplicity has greatly increased the cost of doing business in the highly decentralised spain. Companies often having to grapple with various tax requirements.

    " I guess there is an argument to be made about sudden and predictable big increases and liquidity issues local authorities may have (mines moves in, needs a bigger road, but needs it before it has used it and town can't pay for it right away). But they can be resolved by having the investor pre-pay for the increases in a way. So that it's still the externality that is taxed, only with different time scales which allows a clear, simple and stable system to remain in place."

    That’s the problem with the tax system. Its ex-post. Developer contributions are ex-ante. Money is paid upfront. As I said, the good thing about an ex-ante model is that it reduces the other problem we face in Zambia "exploitation" - firms renege and runaway. Though I conceed that "ex-ante" requirements have the potential cost of increasing the cost of business - asking a firm to spend money upfront without a earning a return may be challenging, and might be counter intuitive if your aim is to attract businesses! Although this problem can be addressed through partial phasing of infrastructural requirements.

    ReplyDelete
  30. we need to ensure that the "negatives" impacts on local services are rightly internalised. I don't think you actually disagree with this. Isn't the discussion about how best to "internalise" these things, and whether the "developer contributions" have a role to play? 


    exactly.


    But how would you make sure you tax the additional externality, without increasing the burden on existing users? Or do you not care that you would be asking the existing users to pay twice? They first paid for the road to be built and now along comes the mine with its increased demand and now you asking them to contribute again? I am more interested it the first question :)

    There are many ways to answer this one.
    One way is to say the existing users did enjoy the existing road and will enjoy the improved road. Assuming the contribution is more or less proportional to use, the existing users may be paying twice but they're also using it twice.

    Another way, and that's my prefered one, is that those things should be financed over time with more or less constant contributions. Assuming that before the mine moves in, the total cost is 100 with each user pay 1, if the mine makes the cost of road services jump to 200, the existing users would most likely still pay 1. (again, with contributions being more or less proportional to use).

    Once again, at the end, it's still the mining company that pays the difference.


    No! I was saying that your system allows for the possibility of corruption through rebates!

    My point was that corruption through rebates is more likely to be exposed and therefore harder to pull off than corruption through a contributions framework.
    I assume that rebates are now the answer to the question I have asked above? :)

    Nope.

    Not if you Spanish. Multiplicity has greatly increased the cost of doing business in the highly decentralised spain. Companies often having to grapple with various tax requirements.

    Oh I know. Same goes for the US and its states and many other places. And what's worse is that the cost of doing business is mainly increased for the entrants as local authorities are usually under the influence of existing firms.

    But what I mean to say is that in this particular question, clarity is a bigger issue as I believe multiplicity of clear requirement is better than one single unclear and difficult to grasp one.

    That’s the problem with the tax system. Its ex-post. Developer contributions are ex-ante. Money is paid upfront.

    But that's only a problem is the increase is sudden and predictable and if the investment has to done right away.
    Usually that's not the case as most of the time, the increase are more or less constant.
    But with a growing tax base, it's usually safe to assume the investment can repayed.

    As I said, the good thing about an ex-ante model is that it reduces the other problem we face in Zambia "exploitation" - firms renege and runaway.

    You can't cut and run away from a gas tax or a user fee (which can be limited to trucks).

    Though I conceed that "ex-ante" requirements have the potential cost of increasing the cost of business - asking a firm to spend money upfront without a earning a return may be challenging, and might be counter intuitive if your aim is to attract businesses!

    Well yeah..

    Although this problem can be addressed through partial phasing of infrastructural requirements.

    You mean spreading the requirements over time ? Then why not make them proportional to the externality created ?
    I mean why not have the local governments phase their infrastructure investment according the needs and the revenues instead of phasing requirements for some companies only ?

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  31. "Assuming the contribution is more or less proportional to use, the existing users may be paying twice but they're also using it twice. "

    That wont always be the case. In any case, it violates the polluter pay principle, since the burden is equally shared.

    "Another way, and that's my prefered one, is that those things should be financed over time with more or less constant contributions. Assuming that before the mine moves in, the total cost is 100 with each user pay 1, if the mine makes the cost of road services jump to 200, the existing users would most likely still pay 1. (again, with contributions being more or less proportional to use)."

    This is the right approach but difficult to implement with a tax. I still think the "tax rebate" idea is the best solution if a local tax was deployed.

    "But that's only a problem is the increase is sudden and predictable and if the investment has to done right away. Usually that's not the case as most of the time, the increase are more or less constant."

    Not sure that is the case. For two reasons. First transport infrastructure is lumpy. Secondly, in Zambia and many other african countries, we are seeing investment in "virgin territory" so to speak. This is not the usual small local road improvement.
    "You can't cut and run away from a gas tax or a user fee (which can be limited to trucks)."
    But these are variable cost charges. I am talking about "sunking the cost" upfront.

    "You mean spreading the requirements over time ? Then why not make them proportional to the externality created ?"
    In theory you can, but in practice you can't. The problem is that of indivisibility. That’s why I tentatively said "partial".

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  32. "Assuming the contribution is more or less proportional to use, the existing users may be paying twice but they're also using it twice. "

That wont always be the case. In any case, it violates the polluter pay principle, since the burden is equally shared.


    How can the burden be equally shared if the contribution is proportional to use ?

    But beyond that, the polluter pay principle doesn't absolve already established polluters.



    Another way, and that's my prefered one, is that those things should be financed over time with more or less constant contributions. Assuming that before the mine moves in, the total cost is 100 with each user pay 1, if the mine makes the cost of road services jump to 200, the existing users would most likely still pay 1. (again, with contributions being more or less proportional to use)."

This is the right approach but difficult to implement with a tax. I still think the "tax rebate" idea is the best solution if a local tax was deployed.

    I don't see why you'd need a rebate if the cost for existing users doesn't go up. And I don't see what would make it so hard to impliment.

    Not sure that is the case. For two reasons. First transport infrastructure is lumpy. Secondly, in Zambia and many other african countries, we are seeing investment in "virgin territory" so to speak. This is not the usual small local road improvement.

    Well, yeah.. But neither make the increase of use sudden and predicable. Between induced demand and the fact that even mines don't reach their full capacity overnight, there's some time.
    Now the interesting thing with the lumpiness of transport infrastructure is that it's something I brought up the last time as an issue. I can't for the life of me figure out how planners can estimate the infrastructure demand and use precisely enough to request exact contributions.

    You can't cut and run away from a gas tax or a user fee (which can be limited to trucks)."
But these are variable cost charges. I am talking about "sunking the cost" upfront.

    Once, again, that's exactly why there needs to be a permanent and constant road fund (financed by in a simple way) instead of trying to find an investor big enough to make him sunk the cost. Even big investments should be constant.

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  33. ”How can the burden be equally shared if the contribution is proportional to use ?”

    Because it has to be “proportional to use” of the “new investment”, not plus existing investment.

    ”Now the interesting thing with the lumpiness of transport infrastructure is that it's something I brought up the last time as an issue. I can't for the life of me figure out how planners can estimate the infrastructure demand and use precisely enough to request exact contributions.”

    You don’t mean “planners”. You mean “transport economists”.
    It is very easy with multi-modal models. The problem of application is purely of expertise.


    ”Once, again, that's exactly why there needs to be a permanent and constant road fund (financed by in a simple way) instead of trying to find an investor big enough to make him sunk the cost. Even big investments should be constant.”

    The point I was making was that if you are also interested in “sunking” the investment then variable cost charges is not the way forward. Of course there are other ways of “sunking” investment.

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  34. ”How can the burden be equally shared if the contribution is proportional to use ?”

Because it has to be “proportional to use” of the “new investment”, not plus existing investment.

    Will the existing users use the new investment ?

    ”Now the interesting thing with the lumpiness of transport infrastructure is that it's something I brought up the last time as an issue. I can't for the life of me figure out how planners can estimate the infrastructure demand and use precisely enough to request exact contributions.” 

You don’t mean “planners”. You mean “transport economists”. 
It is very easy with multi-modal models. The problem of application is purely of expertise.

    No, I mean planners. That does include "transport economists" but the rest of the people involved too.

    I don't think multi-modal models can precisely evaluate the future transport use of each agent and precisely distribute the burden accordingly. After all, how does one exactly predict how many people and companies will move along the road just because the road exists ? Or the kind of opportunities that would creat new demands along the road ?
    Now surely, there can be statistical models and calculations that take all that and everything into consideration but what kind of army of transport economists, urban planners, engineers, accountants and computer one would need to actually make it happen ? How much that calculation would cost ?

    ”Once, again, that's exactly why there needs to be a permanent and constant road fund (financed by in a simple way) instead of trying to find an investor big enough to make him sunk the cost. Even big investments should be constant.”

The point I was making was that if you are also interested in “sunking” the investment then variable cost charges is not the way forward. Of course there are other ways of “sunking” investment.

    Unless your charge takes into consideration the original investment. After all, when you buy shoes or consume energy, you don't only pay the marginal cost of making that additional pair of shoes or the variable cost of the power plant, you pay for the investment that built the factory, designed the shoes, bought the machines and built the power plant.

    And having a permanent road fund financed by a constant tax (more or less proportional to use) is a good way to spread the investment. It's also a simple (and cost-efficient) way to allocate the burden.

    Beyond that, African countries need to move away from having a taxation system that solely depends on one or two industries and is tied not only to the fortunes of those industries but to their needs too.

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  35. Random,

    ”Will the existing users use the new investment ?”

    It’s a little more complicated.
    Suppose we have an existing 4 lane road, used by existing users.
    Along comes the mining company with all its freight. Planners decide that 2 lanes are needed. There are two possible outcomes. The two lanes are used solely for freight through traffic control measures.

    Under this scenario existing users don’t use the new investment. Any non-mining freight traffic would have to pay a charge (this has actually happened on one the roads from Zambia to DRC which has recently been developed by one of the mining companies – though under that all non-mining traffic who use the road pay because there was nothing there really before!).

    An alternative scenario is one without traffic control measure for the new lane. The question there becomes whether the new lane is an “over provision”. If it is not then existing users in theory just continue to use the existing lanes. If it is an over provision then of course existing users are now benefiting through the new investment through time savings and so forth.

    ”After all, how does one exactly predict how many people and companies will move along the road just because the road exists ? Or the kind of opportunities that would creat new demands along the road ? Now surely, there can be statistical models and calculations that take all that and everything into consideration but what kind of army of transport economists, urban planners, engineers, accountants and computer one would need to actually make it happen ? How much that calculation would cost ?”

    The issue of expertise of course is relevant. But the models are there and can be applied with a degree of confident. The issue of “scale” is important. You can’t apply multi-modal models and “off model” assessment of cost attribution for relatively small and obvious projects. I would restrict it to strategic infrastructure e.g. motorways where mining demand is disproportionate.

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  36. It’s a little more complicated.

    Under both scenarios, I don't see how the existing users are worse off.

    The traffic control measure one is not so different from having a road fee for freight, is it ?

    The issue of expertise of course is relevant. But the models are there and can be applied with a degree of confident. The issue of “scale” is important. You can’t apply multi-modal models and “off model” assessment of cost attribution for relatively small and obvious projects. I would restrict it to strategic infrastructure e.g. motorways where mining demand is disproportionate.

    So you would apply models that evaluate mining demand for future infrastructure and charges mining companies accordingly only to places where mining demand is disproportionate ?

    I still don't understand the point of the whole thing. Is it to build a sustainable infrastructure financing framework or is it to find ways to charge mining companies ?

    Once again, with a financing model that is proportional to use, is any cent of mining contribution lost ?

    ReplyDelete
  37. Random,

    My point was that there are ways of making sure existing users do not pay, and this is consistent with pricing the investment relative to beneficiaries.

    Also the issue of "disproportionate" demand applies to non-mining firms as well.

    ReplyDelete

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