Attorney General ready to defend new mining taxes
Attorney General ready to defend new mining taxesBy Joan Chirwa
Sunday March 02, 2008 [09:01]
THE Attorney General is ready to defend Zambia in the courts of law once mining companies take legal action against the government over the new taxes for the mines, secretary to the treasury Evans Chibiliti has said. And Chibiliti has said his office and finance minister Ng’andu Magande had received strict directives that no negotiations should be held with mining companies regarding the new tax regime for the mines.
Meanwhile, mining companies, through the Chamber of Mines, have proposed a graduated tax for mineral royalties as opposed to the three per cent proposed by the government.
Appearing before the expanded parliamentary committee on estimates on Friday, Chibiliti said there was a possibility that mining companies would resort to dragging the government to court over the new tax regime based on the existing development agreements (DAs) signed with the state.
“If the mines decide to take government to court, the Attorney General (Mumba Malila) has indicated that he is ready to defend the country and ensure government get a fair and equitable distribution of mineral wealth through increased taxing of the mining industry,” Chibiliti said. “Government has already considered the fact that mining companies might take legal action. We have thought about this and have evaluated government’s legal position and that of the mining companies. It is very possible for the mining companies to take government to court on the basis of the DAs.”
He was responding to extended committee chairperson Geoffrey Beene who wanted to know what would happen once mining companies took legal action against government’s decision to increase mine taxes.
Chibiliti said the government was only interested in increasing benefits of its mineral resources for the people and not after suppressing mining investments in the country, emphasising on the creation of a fair partnership between government and the mines.
“If the sharing mechanism is unfair, it is unlikely that the Zambian people would want to continue with such a partnership. I personally wouldn’t want the Zambian people to perpetrate a partnership that is unfair,” Chibiliti said.
“We are scheduled to begin meeting mining companies this week on how they can compute the taxes unlike having them to rely on people that do not understand how the mining industry operates. Mining companies need to have faith in us. We have worked with them for a very long time and we have the history and experience of working with the mines. Government can therefore not, in any way, consciously set out to destroy the mining companies.”
Beene further asked whether the decision not to document the expected mine revenues in the yellow book was as a result of fears that government might not get the projected returns in case of litigation.
But Chibiliti said the expected additional mine revenues had not been factored into this year’s budget because the nation needed to collectively agree on the usage of additional resources from the mines.
“Already, we are struggling to use money arising from normal revenues. It is already a big challenge to use normal revenues properly, so we must think through and have a plan on how to spend additional revenue from the mines,” Chibiliti said.
“This kind of money, if not well managed can actually damage the economy; it can cause price escalations. It can also lead to what is called the ‘Dutch Disease’ where every industry even if not associated with the mines can decline. We need to use the money in such a way that we don’t destroy the agriculture, manufacturing and other key sectors of the economy.”
And Chibiliti said there would be no negotiations with the mining companies over the new tax regime.
“The Secretary to the Cabinet and the Minister of Finance do not have the mandate to negotiate the new tax regime. President Mwanawasa said if there is need for clarity, we can only explain to the mines how the new tax regime works,” Chibiliti said. “We are confident that once provided with an explanation on how to compute tax obligations, the mines will no longer be alarmed.”
And the Chamber of Mines general manager Frederick Bantubonse proposed that government should come up with graduated tax system for mineral royalties where contributions by mines would be based on the prevailing market price for copper.
“The mines agree with the proposed taxes except we propose that we should have a graduated tax for mineral royalties. For example, when prices of copper are at their lowest, royalties can be charged at one per cent and then three per cent when prices are good,” Bantubonse said.
“We also propose that government should go with either the windfall tax or the variable tax and not both. If it decides to implement the variable tax, then we suggest that it should be at 16 per cent and not the proposed eight per cent and if government goes ahead with the windfall tax, we propose that this must be tax deductible and it would help the matter.”
Bantubonse further advised that the expected additional revenue from the mines should be invested in key sectors such as energy.
And Chamber of Mines president Passmore Hamukoma said there was a possibility that some mining companies would not subscribe to the views of the chamber on taxes as presented to the committee, saying the chamber was given limited time to discuss the matter with all its members.
But Lusaka Central Patriotic Front (PF) member of parliament Guy Scott said the mines need to negotiate as one body and not individually.
Labels: ATTORNEY GENERAL, WINDFALL TAX
posted by MrK @ 4:43 PM
1 Comments:
C0MMENT: " “Already, we are struggling to use money arising from normal revenues. It is already a big challenge to use normal revenues properly, so we must think through and have a plan on how to spend additional revenue from the mines,” Chibiliti said. "
Oh, I have a few ideas. :) How about starting hundreds of commercial size organic farms? How about providing farms with water year-around, instead of just when the rains come - on farm water management. Small scale dams, rainwater catchment areas and more.
How about starting massive works programs, that at the same time create infrastructure (roads, bridges, dams and irritation management) and put the mines' money in the pockets of the people, so they can spend it and stimulate the economy (demand side economics - which basically means that you stimulate the economy by creating a demand for goods and services - as opposed to supply side economics, where the wealth concentrated in the elite is supposed to 'trickle down' to the masses)?
How about using this money to make sure that every Zambian child has a high quality education, including through college level? This in itself will generate professionals, who will stimulate the economy by creating businesses and supplying highly skilled employees.
Stimulating the economy in a way in which no one is left behind and economic activity is sustainble is not that difficult - especially when the money is available.
If this is done, Zambia will be looking forward to a real economic boom.
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