State gets $71m tax from mines

State gets $71m tax from mines
By Times Reporter

PARLIAMENT heard yesterday that the Government collected US$71,490,000 as tax from the mines over a period of five years. Mines and Minerals Deputy Minister Maxwell Mwale was responding to a question from Mwinilunga East member of Parliament (MP) Stephen Katuka (UPND), who asked how much revenue in United States dollars the Government realised in form of tax from the companies from 2002-06. The MP also wanted to know how much profit the mining companies made in the same period, to which the Mr Mwale said $652,296,093 was made as profit for the companies. The minister said the revenue the Government realised was in form of company tax, withholding tax, dividends and through mineral royalties.

He explained that the low levels of company tax in the earlier years was attributed to carry-over losses agreed upon in the development agreements between the Government and mining companies to enable mining firms recover the heavy start-up costs. In 2006, most mining companies had started making positive declarations, hence higher tax figures.

Mr Mwale said during 2002-05, there was an increase in the recapitalisation of the mining sector to take advantage of the up-turn in metal prices in the global market. The recapitalisation was tax deductible and, therefore, resulted in significant reduction in company tax. Mining companies did not make profits in 2002 due to various reasons, among them, the fact that the mines had just been privatised and a lot of rehabilitation was in progress and that there were low operating efficiencies and low copper prices.

After many years of being depressed, the price of copper on the London Metal Exchange began to recover in 2003, a recovery which was sustained from onwards to 2006, contributing to increased profits for the mining companies. “The price of copper in 2002 was $0.68 per 1 barrel. It reached $3.99 per barrel in 2006 and as at January 2007, the price of copper was $2.50 per barrel,” the deputy minister told the House. Mr Mwale said the Zambian economy benefited from the profits made by mining companies through taxes, and to that effect, the companies remitted 11 per cent of profits to Government. “The House may wish to note that the contribution of the mining sector to the Growth Domestic Product (GDP) was 8.3 per cent in 2005 and 11.6 per cent in 2006. The figure of 2006 was preliminary and could be adjusted upwards or downwards,” he said.

Copperbelt produced 335,023 tonnes of copper in 2002, 372,222 tonnes in 2003, 418,986 in 2004, 382,122 tonnes in 2005 and 388,302 tonnes last year while North-Western produced 79,626 tonnes in 2005 and 127,316 in 2006, respectively. Mr Mwale said the decline in copper production on the Copperbelt in the period 2005-06 was largely due to labour disputes, fuel shortages caused by the shut-down of Indeni Oil Refinery during the month of October and mine accidents. Mr Katuka wondered why the Government could not increase the mineral royalty tax to about 10 per cent, and Mines Minister Kalombo Mwansa said the Government had already done so but over a longer period this would be considered.

The deputy minister also informed the House that Konkola Copper Mines (KCM) made a profit of $113 million during the 2005-06 financial year while Mopani made about $28 million. He was responding to a question by Kantanshi MP Yamfwa Mukanga (PF) who wanted to know how much profit was made by privatised mines on the Copperbelt during the 2005-06 financial year, mine by mine. Mr Mwale said Luanshya Copper Mines made a loss of about $1 million, while Chibuluma Mine made a profit of about $12 million and Chambishi had $385,000 due to cobalt price fall. On how much of the profit was ploughed back into the community mine by mine, the minister said KCM gave about $4 million, Mopani $2 million, Luanshya $361,000, Chibuluma $1 million, Chambishi $966,000 and NFCU$22,000.

Lusaka Central MP Guy Scott (PF) wondered whether the special unit under the Ministry of Mines to monitor profits still existed, to which Dr Mwansa said a post-privatisation unit was in place to undertake such a task.

Acting leader of Government business, George Mpombo, told the House that the Government, through the disaster management unit distributed 435,659 bags of maize as relief food last year constituency by constituency. Mr Mpombo, who is Defence Minister, was responding to Mr Mukanga who wanted to know how many bags of maize were distributed as relief food last year constituency by constituency.

The House also heard that K18.5 billion was last year remitted by ZESCO to the Zambezi River Authority (ZRA) and that the money was used to finance operations and maintenance of equipment, as well as to monitor water levels at Kariba dam. Energy and Water Development Deputy Minister Gaston Sichilima said this in response to a question by Gwembe MP Brian Ntundu (UPND) who wanted to know how much money ZESCO remitted to the ZRA.