(DAILY MAIL) Mine owners threatens to sue Government
Mine owners threatens to sue GovernmentBy REBECCA CHILESHE
MINING companies have resisted the proposed new mining tax regime and threatened legal action against Government if it implements the new law that will introduce higher taxes in the sector. Making a presentation before a parliamentary watchdog committee, the Chamber of Mines, a cartel of mining firms operating in Zambia, painted a picture of doom and gloom, warning of an economic recession with obvious consequences of rising unemployment, poverty and a serious damage to Zambia’s reputation as a favoured destination for foreign direct investments (FDIs).
The mining firms are ready to re-negotiate the development agreements they signed with Government but will drag the State to court over the proposed new law.
Chamber of Mines of Zambia general manager, Fred Bantubonse, told the expanded parliamentary committee on estimates yesterday that mining firms were saddened that Government had decided to change mining taxation “without consultation with investors or consideration of the existing development agreements.”
The parliamentary committee, chaired by Itezhi Tezhi UPND member of Parliament, Godfrey Beene was told that the mining firms were totally opposed to the proposed new taxation in the sector and will definitely litigate against the Government.
“It must be recognised that Zambia still needs private investment from both local and foreign sources to drive the economy forward. The way in which Government deals with existing investors is the best indicator of how future investors, whether in mining or other sectors, will perceive the country,” Mr Bantubonse said.
He alleged that the new tax regime would weaken international confidence in the Zambian economy and disrupt future FDIs.
“The number of new projects will drop significantly, if not to zero,” he said.
He said following the budget address by the Minister of Finance and National Planning, mining firms engaged tax consultants who found that the effective tax rate could aggregate to as much as 79 per cent.
He warned that economic recession would set in with obvious consequences of rising unemployment and poverty and ruin Zambia’s reputation as a destination for FDIs.
He said a unilateral change in the tax regime and the associated impact on the country’s ability to respect agreements has come at a time when Government was seeking to secure a sovereign risk rating to make credit much cheaper.
Chibuluma Mines Plc chief financial officer, Ed Mounsey, said the mine had poor profits for eight years and that new money only started coming in the last two years.
He said if the new tax regime was effected, the mine would have a zero net return and would have to generate additional profits from elsewhere.
First Quantum Minerals (FQM) country manager, Chisanga Puta-Chekwe, said the mine had invested US$493 million in Kansanshi Mines Plc and “transformed the face of Solwezi.”
Mr Chekwe-Puta said development agreements were legally binding documents and that if the new tax regime was effected, FQM would have no choice but to seek legal redress.
He said Government must note that they would be liable for settling the cost of litigation.
Equinox Minerals Limited president and chief executive officer, Craig Williams, said Lumwana Mine had not enjoyed any windfall profits and that it was months away from producing its first pound of copper.
He said once profits started coming in, they would be directed to paying the huge debt in millions of dollars it owes financiers of the US$800 million Greenfield investment.
He warned that the new tax regime was not good for new investments and so Government should just renegotiate the development agreements.
Konkola Copper Mines (KCM) Plc director of operations, CP Baid, said the proposed fiscal regime would jeopardise mines’ operations.
“The new tax would make Zambia uncompetitive, unattractive and would lead to investment destruction.
There is need for meaningful dialogue before the new tax regime is implemented,” he said.
Mopani Copper Mines (MCM) chief financial officer, Gavin Heale, said the mining companies were interested to know the formula used to arrive at the proposed 47 per cent tax.
Luena MP, Charles Milupi (Independent), said some of the figures being presented were of concern because they did not seem correct. He wondered whether this was an attempt by the mining companies to understate profits.
Monze MP, Jack Mwiimbu (UPND) said he had only threats from mining firms yet the reason the committee invited them was to get their views on the proposed tax regime.
But Chamber of Mines of Zambia chairperson, Passmore Hamukoma, said the mining companies were not issuing threats, but were merely sharing their views so as to arrive at some form of understanding.
But in an interview later, Minister of Finance and National Planning, Ng’andu Magande, said Government was not obliged to consult anyone over tax changes.
He said the new mine tax will be implemented and Government was ready to meet opponents in court.
Labels: DEVELOPMENT AGREEMENTS, MINING CONTRACTS, WINDFALL TAX
posted by MrK @ 2:34 AM
2 Comments:
What a terrible burdon it is to have to pay taxes. According to the mines, only workers should pay taxes. If they had to start paying taxes, well that would just undermine Zambia's image in the world.
These development agreements are a disgrace. They were entered into under extreme duress from the World Bank and IMF.
Under such circumstances, no one in their right mind will think less of the Zambian government if they scrap these disgraceful agreements.
Do the mining companies hearts bleed as much for the poor people who die because they cannot afford the basics of life, the way their hearts bleed at the thought of having to pay taxes?
Are they horrified at the thought that they have to pay taxes, for the upkeep of the roads their trucks help to wear down?
The entire argument is extremely distasteful to me.
Also, there is no coincidence to this 'united effort', as the new tax laws go into effect within days and months.
You could call it a last ditch effort.
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