Saturday, March 01, 2008

(TIMES) Mine owners stay put

Mine owners stay put Parley Committee advises them to come up with alternative tax proposals
By Times Reporter

A PARLIAMENTARY Watchdog Committee has advised mining firms to submit alternative tax proposals following their resistance of the mines tax regime proposed by the Government which they claim is detrimental to their operations. The Expanded Committee on Estimates yesterday told the Chamber of Mines in Zambia (CMZ) that they should come up with proposals and submit to the Committee, which would hear their presentation tomorrow.

Appearing before the Watchdog Committee, the CMZ general manager, Frederick Bantubonse said the new tax regime was unfair to the investors and suggested that an urgent meeting to review the levels of taxation be called.

Mr Bantubonse argued that the proposed tax regime by the Government would undermine the operations and sustainability of the mining industry.

He said although mining companies agreed with the principle of fair and equitable distribution of earnings from the mineral resources, the decision to arrive at the new taxes should be agreed through dialogue.

“It is appreciated and understood that as a sovereign State, Zambia has the right to pass laws as it sees fit in the overall national long-term interest. It is in the light of this that development agreements were entered into,” Mr Bantubonse said.

He said the existing Development Agreements (DAs) which set out the long-term relationship between investors and the Government formed the basis for sustainable inflow of billions of dollars in Foreign Direct Investment (FDI).

Mr Bantubonse said since privatisation, copper production had more than doubled to over 500,000 tonnes per year in 2007 and with further ongoing investments, the output was expected to exceed 1,000,000 tonnes in the next few years.

Lusaka Central member of Parliament (MP), Guy Scott (PF) accused the mining investors of been confrontational, aggressive and defensive.

Dr Scott said since this was the second time that the mining investors were appearing before the Committee, it was anticipated that they should come up with proposals that they felt the Committee should present to the House before finally reaching the Government.

But Mr Bantubonse said that the CMZ members had confirmed their willingness to discuss and renegotiate the agreements in the context of the changed economic circumstances.

He argued that the mining industry was highly capital-intensive and served a market that was unique in nature. He further said the industry required continuous investment for its sustenance and growth.

“It is in this context that the tax proposals have to be seen in terms of equitable distribution of the surpluses rising out of the current high prices. A scrutiny of the new mining tax proposals by tax experts has shown that the effective tax rate is in fact significantly higher than those indicated by the Government,” Mr Bantubonse said.

It was at that point that Mr Beene suggested to Mr Bantubonse that they go back and consolidate their proposals on the tax regime. Mr Beene said since the matter was urgent and of great importance, the proposals from Mr Bantubonse should be brought back to the Committee tomorrow.

“Because this matter is so serious, you have to prepare a consolidated proposal which you should bring back on Saturday. We do not usually sit on Saturday but because of the urgency, we have no option but to do so,” Mr Beene said.

He advised that the mining investors should not underrate the role of the Committee, as the House and the Government as a whole took its recommendations seriously.

Mr Bantubonse, however, continued and said that during this period, the extent of investment and cost of operations had increased substantially due to the increases in the prices of commodities, manpower and other inputs. He said these aspects seemed to have been overlooked in the tax proposals.

“Member companies are concerned that implementation of the proposed tax regime in its current form will adversely affect the long-term sustainability of the mining industry and will not be in the national interest.

‘‘We welcome constructive and open dialogue with the Government as soon as possible, to come up with a viable mining tax regime prior to the current Bill being enacted by Parliament into law,” Mr Bantubonse said.

While the Chamber of Mines did not have comments on the aspects of the Income Tax Bill, it was of the view that the portion of it be relevant to the mining industry. As a result, the Chamber was ready to dialogue with the Government before the Bill was enacted.

On the Value Added Tax (VAT) Amendments Bill, the Chamber submitted to the Committee that it did not have any objections to the definition of ‘‘an operating lease’’ and a ‘‘finance lease’’.

Similarly, the Chamber did not have any objections to the clause that states that ‘‘provide for the eligibility of diplomats and other designated officials to claim VAT paid on eligible goods and services’’.

Mr Bantubonse further said that the Chamber did not have objections to the Customs and Excise Bill.

On the introduction of export levy on cotton seed and copper concentrates, Mr Bantubonse said the current position regarding facilities for the processing of copper concentrates into finished copper were not adequate to process all the concentrates arising from operations in Zambia.

He submitted that there should be revision of customs and excise duty on cement, copper, unrefined copper and copper waste and scrap.

“We will accept the principle of fair and equitable distribution of earnings from the mineral resources for all stakeholders. We do not believe that the proposed tax regime for the mining sector will achieve this,” Mr Bantubonse said.

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