Maravi

Mining firms urge revision of windfall tax

Mining firms urge revision of windfall tax
Written by Fridah Zinyama
Thursday, January 08, 2009 2:15:10 AM

THE Jesuit Centre for Theological Reflection (JCTR) has asked the government to urgently prioritise the diversification process owing to the current ‘windfall tax saga’ in the mining sector.

The mining companies have called on the government to revise the windfall tax in view of the low copper prices on the international market.

In a press statement, JCTR Programme officer for Trade and Capacity Building Humphrey Mulemba stated that the government’s concentration on the mining sector had deprived other sectors like agriculture of the much-needed infrastructure for its development.

“Zambia’s foreign earnings from copper and cobalt amount to 80.8 per cent which lessens the economic dependence of government on other taxable sectors,” he stated.

Mulemba further expressed concern at the inability of government to predict major economic turning points.

“For example, neither the commodity price surge in 2004 nor the slump in 2007 was widely predicted. For Zambia, the instability and unpredictability of mineral prices and revenues pose a threat to sustainable development prospects,” stated Mulemba.

“As we have seen, the credit markets constrict in the international economy, the financial crisis has sparked job losses and closure of mines in Zambia. The country fell into the trap where during the boom, when prices and revenue prospects were high the scope for foreign borrowing was encouraged and increased.”

And JCTR programme’s officer for Debt Privilege Haang’andu observed that the level of dependence on earnings from copper and cobalt showed the impact of the “boom and bust” cycles of the mining sector on both governance and economic management.

Haang’andu observed that the deteriorating governance problem was illustrated by intended protests over the rising food prices.

“Similarly, poor economic management has been exhibited through continued high levels of borrowing without proper institutional policies that govern the contraction and execution of external debts,” he stated.

He also observed that dependence on copper and cobalt earnings perpetuated under-development, thereby increasing the need to find a solution by diversifying the economy in more stable sectors.

“A clear lesson is the harm that the boom and bust cycles cause to countries like Zambia, whereby the country fails to save enough through windfall taxes or, even worse, borrows heavily against uncertain future revenue,” stated Haang’andu.

Labels: HUMPHREY MULEMBA, JCTR, MINING, PRIVILEGE HAANG'ANDU, WINDFALL TAX

posted by MrK @ 2:16 AM