SOME SIGNIFICANT RELATIONSHIPS BETWEEN TAXATION AND ECONOMIC PERFORMANCE DURING TRANSITIONAL PERIOD OF DEVELOPMENT. (THE ZAMBIAN EXPERIENCE FROM 1964 TO 1980)

Taxation as a determining factor of economic development had a changing role in Zambia between 1964 and 1980. That role involved the increasing use of taxation as a tool of control, regulation and stabilization of economic performance in addition to revenue. This study confirmed the hypothesis that the changing role and structure of taxation was the single most influential factor on the trend and pattern of Zambian economic development during 1964-80. The impact of fiscal policies on the cardinal sectors (public, private and foreign) of the economy assumed more importance with the shift from direct to indirect taxation as the economy matured. Customs and excise duties tended to accelerate their revenue contribution role while income and mineral taxes shifted in favour of their control, regulatory and distributive functions. These phenomena seemed to suggest that one theory that can be generalized from such experience of an "open economy" like Zambia's is this: Due to inadequately developed private sector base, the most fundamental structural changes which occur during transitional period are linked with the changes in the fiscal policies. Since the developmental needs of that period are usually extremely pressing while the private sector is still inadequately developed to provide the push to Rostow's "take-off" and on to "sustained growth" stages, the only motive force capable of choking the economy upwards is the government fiscal efforts and incentives. This study, therefore, contends that the orthodox belief that developing economies can rely on foreign trade, loans and grants (aids) for sustained growth was not borne out by the findings of this study. Its conclusion is that re-adjustment and manipulation of the tax system to generate domestic savings and incentives for enterpreneurship is the surest and most feasible strategy for economic development. The experience of Zambia from 1964 to 1980, this study asserts, supports those conclusions.