Maravi

Govt should expect resistance to new mining taxes, warns Dr Mutesa

Govt should expect resistance to new mining taxes, warns Dr Mutesa
By Joan Chirwa
Tuesday February 05, 2008 [03:00]

MINING companies need to examine their consciences in view of the new tax regime announced by the government, University of Zambia (UNZA) Development Studies lecturer Dr Frederick Mutesa has said. And the major mining companies have maintained that they would not give any statement on the new taxes announced in this year’s budget and subsequent remarks made on the issue, adding: “The matter is sensitive and it needs to be handled carefully”.

Dr Mutesa said the government and Zambian people should expect some resistance from mining companies over the new tax regime.

He was commenting on finance minister Ngíandu Magandeís remarks that there would be no room for the mines to negotiate the new mining fiscal regime with the government.

“The minister is very correct in taking the position that he has announced because the final authority in matters of legislation, including the tax policy, is parliament,î Dr Mutesa said.

And in this country, it is high time that parliament played a more significant role in scrutinising the development policies. However, some resistance could be expected from the mining companies, but the mines should examine their consciences, if they have any.”

The major mining companies could not give their views on the new tax regime, saying the matter was still being studied at a much detailed level before their position could be made public.

The government has this year come up with a new tax regime in the national budget, pending parliamentís ratification, with a projected US $415 million (approximately K1.5 trillion) in additional revenue to the treasury in 2008.

The estimates in terms of the expected additional revenue from new mining taxes is significantly higher compared to what the government has been collecting from the mines through taxes.

In 2006, government collected slightly over K35 billion from mineral taxes when other copper rich countries like Chile gained around US $1.7 billion (approximately K6.3 trillion, half of Zambia’s national budget) as tax contributions from its 17 largest privately held mines in just one quarter of 2006.

Last year, the government engaged a team of experts to renegotiate development agreements with the mines as part of the process of introducing a new tax regime announced that year, which entailed having royalty taxes pegged at 3 per cent as opposed to 0.6 per cent.

It was however noted that even if mining companies were to move to
the 2007 tax regime, the country would still not get a fair share from its mineral resources.

It is in this vein that it was decided to have a new fiscal and regulatory regime in the 2008 budget to bring about an equitable distribution of the mineral wealth between the government and the mining companies.

Effective April 1, 2008, mining companies will be expected to pay corporate tax at 30 per cent; mineral royalty tax on base metals at three per cent of gross value; withholding tax on interest, royalties, management fees and payments to affiliates or subcontractors in the sector at the rate of 15 per cent and a variable profit tax of up to 15 per cent on taxable income, which is above eight percent of the gross income, will be introduced.

A windfall tax has also been introduced at different price levels for different base metals.

For copper, the windfall tax will be 25 per cent at the copper price of US $2.50 per pound but below US $3.00 per pound, 50 per cent at a price for the next 50 cents increase in price and 75 per cent for a price above US $3.50 per pound.

Magande said these measures were “competitive, reasonable and balanced."

Labels: DEVELOPMENT AGREEMENTS, FREDERICK MUTESA, MINING AGREEMENTS, WINDFALL TAX

posted by MrK @ 3:32 AM