Maravi

World Bank calls for 'windfall tax' on mines

World Bank calls for 'windfall tax' on mines
By Fridah Zinyama
Friday May 18, 2007 [04:00]

A WORLD Bank adviser has urged the government to impose a 'windfall tax' on the mines to enable Zambia benefit from the high copper prices on the international market. A windfall tax is said to be a one-off tax levied, where some unexpected increase in profits or value is made which the government or the public think is an unreasonable advantage taken at the public's expense.

Presenting a paper to the World Bank, Paul Collier said the Zambian government had made an error in allowing the tax-free regime for copper despite the copper boom.

“This is one of the first order errors that needs urgent attention at senior level within the Bank,” Collier said.

He said in re-contracting the mining agreements, Zambia should not dwell on the legal issues of contract.

“Whether a contract should be maintained is a cost-benefit decision,” Collier noted. “I suspect that the gross gains from the re-contracting considerably outweigh the value of the current ‘reputation’ of the Zambian government.”

And in a submission to the Parliamentary Committee on Economic Issues looking at the legal and policy framework on investment in Zambia, Lusaka Central member of parliament Dr Guy Scott who was quoting from Collier’s paper, said there would be a lot of international support if Zambia decided to impose a windfall tax on the mines.

Dr Scott informed the committee chaired by Kabwata member of parliament Given Lubinda, that the document that was presented to World Bank officials by Collier, on Zambia's copper taxation, would be worth debating in Parliament .

He said Collier was optimistic that it was possible for Zambia to quickly resolve the tax issues, or the country would continue losing revenue from the high prices of copper.

Dr Scott said it was shocking that the government was running a fiscal budget deficit when Zambia was experiencing a peak in copper prices.

He said if the government continued delaying the process of re-negotiating the development agreements and 'windfall tax', Zambia would continue losing about US $ 800 million in potential revenue from the mines.

"This situation cannot be allowed to continue. Government should show a lot more commitment in resolving the tax issues or hospitals will continue running without medicine, schools without teachers and impassable roads," Dr Scott said.

He said if the government made a decisive move over the mining agreements, the mining houses would be left with no choice but to pay the windfall taxes.

"Even if the mining companies tried to rubbish the government to the international community, donors are of the view that Zambia should be benefiting from the rentals that mining companies ought to be paying," Dr Scott said.

Dr Scott said Zambia needed a good lawyer to handle the legal implications that would arise from re-negotiating the development agreements and windfall taxes.

He said government had been delaying to make a decision over the issue of the mines because they feared that Zambia’s reputation would be ruined.

"It is not just about Zambia's reputation in the eyes of the donor community at stake here but the future of Zambians who are not benefiting from their resources," said Dr Scott.

There have been calls from different stakeholders for government to quickly impose a windfall tax on the mines so that Zambians could benefit from the good prices on the international market.

Labels: GUY SCOTT, WINDFALL TAX, World Bank

posted by MrK @ 5:00 AM