Maravi

Letters - Mazabuka Windfall tax

COMMENT - Excellent letter. I have always said that the Royalty Tax should be the only tax on the mines, and that it should be jacked up from 3% of turnover to 20%. At $4900/tonne, that would mean 20% is $980/per tonne, leaving the company with $4020/tonne. And with cost at $2100/tonne, they would still make $1920/tonne in pure profits. Clear, simple, and the state would earn $1000 million ($1 billion) per year in revenues from mining. In 2004, they collected $1000 million from all revenues combined, and 'needed' $600 million in 'donor aid'.

So there is no excuse for not taxing the heck out of the mines, and anyone who says otherwise is a paid shill for the mining companies, and against the people of Zambia.

Mazabuka Windfall tax
By P Mulenga - Development Economist Essex, UK
Tue 20 Oct. 2009, 16:27 CAT

I wish to comment on the remarks attributed to one John Kasanga, a local economic expert, in your recent Business Post article titled ‘Zambia to lose revenue from anticipated copper shortage’.

It is unfortunate that local experts willingly, or unwittingly, allow themselves to be used as the mouthpieces of exploitative foreign capitalists who have no interest in developing the country.

In the first instance, the expert’s comments on job creation are at variance with the statistics provided by the Minister of Finance in the 2010 budget speech.

According to the Minister, 8,500 jobs have been lost since the beginning of 2008 and only 1,500 have been regained. It is wishful thinking to expect 7,000 new jobs to be created merely by expanding the existing mine capacity.

Second, the financial reports of all publicly listed mining companies operating in Zambia are available online. These operations already enjoy substantial tax relief and the price of copper has averaged US $ 4,900 per tonne over the past five years.

This is more than 100 per cent above the break-even price of US $2,100 per tonne assumed in the majority of business plans; therefore there is no plausible reason why any mine should declare losses. Furthermore, the development agreements signed in the late 1990s provided tax relief for expansion and growth up to the end of mine life. Mines do not spend on ‘expansion and growth’ until the last day of operations, they must make a profit for the shareholders at some time.

Third, the comparison with OPEC oil pricing is misplaced because OPEC is a multinational organisation with a diverse membership across all continents. Each member country has its own distinct tax regime suited to its national development priorities hence the price of oil has a different impact on each country. In fact most of OPEC’s non-African members are shining examples of how responsible governments safeguard their natural resources against selfish foreign exploitation and maximise revenues to benefit their people.

The governments of the Arab Gulf States, for example, showed great foresight by instituting revenue measures that were in line with their national development requirements instead of bowing to the dictates of powerful Western oil companies.

The results are evident in the remarkable development of Dubai, Kuwait and the other Gulf States since the 1980s. Venezuela, Chile and Botswana are other examples of developing countries that have exercised prudence in the management of their natural resources.

I urge all patriotic Zambians to press for the reinstatement of the windfall tax immediately and ignore the cries of the detractors. Botswana, which has been better prepared for eventualities, is already feeling the effects of reduced demand for diamonds. If demand for copper diminishes in the foreseeable future Zambia will be doomed.

Labels: MAZABUKA DISTRICT, MINING, WINDFALL TAX

posted by MrK @ 8:45 PM