(DAILY MAIL) Mines threaten to sue State

Mines threaten to sue State
By CHARLES MUSONDA and NKWETO MFULA

SOME foreign mine owners have threatened to sue Government over the new tax regime for the mining sector. But the government says it is ready to defend its position should any of them decide to institute litigation.

Last week, Minister of Finance and National Planning, Situmbeko Musokotwane, held a closed-door consultative meeting with the Chamber of Mines to address challenges facing the mining sector.

The investors want the government to restore their inherent rights that were enshrined in developments agreements they signed when they acquired former ZCCM assets.

In paying the new taxes, the investors disclaimed that the payments did not necessarily mean that they had accepted the tax regime and that they reserved the right to take legal action.

This is according to the parliamentary committee on estimates’ report that was released last week.

Committee chairperson Godfrey Beene said this was one of the major challenges faced in implementing the fiscal regime.

Mr Beene said increasing prices of oil and raw materials had negatively affected implementation of the windfall tax because the unit production costs for some of the companies had risen to levels higher than the first trigger price.

“The trigger price of the windfall tax had been set at US$2.50 per pound of copper, but some of the companies were reporting costs of production beyond this level,” Mr Beene said.

He said lack of critical manpower such as geologists and mining engineers in the Ministry of Mines and Minerals Development had made it difficult for the government to effectively monitor the mines’ operations.

“The absence of offices for the Ministry of Mines and Minerals Development in all provinces where mining activities were taking place entailed that the ministry’s headquarters in Lusaka could not adequately monitor activities of the mining companies in various parts of the country,” he said.

Mr Beene said the Zambia Revenue Authority (ZRA) did not have adequate information communications and technology and manpower to effectively audit the mining companies for tax purposes.

He, however, noted that the ZRA had established a new unit to specifically deal with challenges associated with taxing the mining sector.

The government has mobilised resources to help the ZRA enhance capacity building requirements to meet the challenges imposed by the new mining sector tax regime.

Efforts are also underway to make the taxpayer education campaign more aggressive to sensitise all major mines and audit them for purposes of ascertaining accuracy of their income declarations.

Mr Beene said Government was confident that if contentious windfall tax issues were addressed, mining companies would meet their obligations.

“Capacity will be strengthened in all relevant institutions dealing with the mining sector so that benefits resulting from the introduction of the new mining fiscal regime could be realised,” he said.

Meanwhile, the Chamber of Mines has written to the Ministry of Mines and Mineral Developments on the challenges being faced by the industry, among them the effects of low copper prices on the international market.

Chamber of Mines president Nathan Chishimba said in an interview in Ndola yesterday that the chamber had written to the ministry of mines to register the sector’s concern on the global recession and its effects on the industry.

He cited the low copper prices on the international market as one of the concerns that had been brought up.

Mr Chishimba could not state the other concerns raised, saying they were not for public consumption.

And Mr Chishimba said the meeting they held with newly-appointed Minister of Mines and Mineral Development, Maxwell Mwale and his counterpart at Finance and National Planning, Situmbeko Musokotwane, was the beginning of dialogue with Government.

He said the chamber welcomed Government’s willingness to hold discussions with the mining sector.

Mr Chishimba was optimistic that the two ministries’ willingness to dialogue with mining companies would yield solutions to matters affecting the mining industry in Zambia.

On Saturday, Dr Musokotwane said although the declining prices were a setback for Zambia’s economic growth, there was still hope for improvement.

He said there was no need to lose hope in the country’s economic growth because of the continued investment in the mining sector.