By Shapi Shacinda LUSAKA, Jan 11 (Reuters) - The International Monetary Fund (IMF) renewed a call for Zambia to raise taxes as the main opposition party prepared protests against the move, likely to fuel tensions in the impoverished country. The new IMF resident representative in Zambia, Birgir Anarson, said President Levy Mwanawasa's government should meet revenue targets agreed with the fund -- an issue that has angered trade unions. Anarson said Zambia needed to widen its tax base after the ratio of tax revenue to gross domestic product (GDP) declined to 17 percent in 2005 from 19 percent in 2000. "There is a need to mobilise additional revenue so that the government can meet its targets," he told Reuters in an interview late on Wednesday, but added: "It is up to the government to decide how they raise the revenue." Anarson said extra revenue would enable Mwanawasa's government to spend more on poverty reduction, health and education, all areas which have lagged despite Zambia's growing income from its huge copper resources. The government has said it will implement some IMF proposals, such as raising tax on mining companies, in the budget at the end of this month, but has declined to comment on whether it will follow other IMF suggestions such as reintroducing sales taxes on food and other staples. Zambia is enjoying solid economic growth and has been praised by western governments for prudent policies, but widespread poverty has left many Zambians questioning whether they are getting a fair share. Police said on Wednesday they had granted the main opposition Patriotic Front (PF) party permission to demonstrate on Friday against the IMF tax proposals. The PF won the majority of parliamentary seats in urban areas in last September's presidential and general elections after promising voters it would cut taxes if elected. TAXING MOSQUITO NETS Anarson said revenue had fallen due to tariff reduction agreements Zambia has signed with other countries and also a rapid appreciation of the kwacha currency in 2006. "Our view is the government's revenue performance has been falling since 2000 and there is a need for more tax collections," Anarson said. Joyce Nonde, an outspoken union leader, told Reuters at a forum on tax policy on Wednesday the IMF risked "wiping out Zambians through malaria by proposing taxes on mosquito nets." The IMF has proposed value added tax on mosquito nets, books, newspapers, magazines and transport. Treasury data shows 40,000 Zambians die of malaria every year. Anarson had no comment on Nonde's accusation. The head of the Institute of Transport (CIT) Zambia, Henry Chipewo, said the IMF was taking a "simplistic" approach. "There is no capacity for the Zambia Revenue Authority to collect all the revenue because of dishonesty and corruption by some (tax) officers," he said. "A lot of money goes into people's pockets through corruption. These are issues the IMF should help the government to address," Chipewo told Reuters. Anarson said the Fund would abide by its poverty reduction growth facility (PRGF) with Zambia, a $320 million three-year lending facility which expires in June this year. The IMF has also suggested a cut in personal income tax paid by workers to at most 27 percent from an average of 35 percent.
