(STICKY) ‘Only Kansanshi Mine is able to pay normal taxes’

COMMENT - I think a couple of hundred million dollars in taxes have gone missing.

‘Only Kansanshi Mine is able to pay normal taxes’
By Chiwoyu Sinyangwe
Tue 27 Oct. 2009, 04:01 CAT

KANSANSHI Copper Mine is the only mine in the country in a position to pay normal taxes, finance minister Dr Situmbeko Musokotwane said yesterday as parliamentarians reiterated calls for the restoration of the abolished windfall taxes regime.

And Zambia Revenue Authority (ZRA) commissioner general Chriticles Mwansa said the expected revenue earnings from the variable profit tax in the mining sector had not yet been determined.

Appearing before the expanded parliamentary committee on estimates, Dr Musokotwane said all mining companies with the exception of Kansanshi Copper Mine were not in a position to pay normal taxes as they were still paying back the startup loans or were expanding their projects.

Dr Musokotwane said the government would be in a position to collect money from the mining companies once they started making profits after repayment loans for their invested capital.

He said the current regime governing the mining sector favoured increasing attraction of investments into the country’s main economic stay than to “kill the cow before it starts producing milk.”

“If we force them mining companies to pay by getting taxes when they are not in the position to do so, the incentive for them to expand their operations will be killed,” Dr Musokotwane told parliamentarians.

“The reason for the revenue not coming from the mining companies is that we recognise that we have to allow them to recover the losses because they spent money to bring in equipment, things like hiring staff which all went up with the recent high international metal prices…so, we allow the companies to write-off losses against profits. I believe that at the moment, only First Quantum Minerals who operates Kansanshi has exhausted the right of that period to pay back the loans and are now in a position to pay normal taxes.”

And Mwansa said ZRA was currently working on modalities of estimating the revenue earnings from the mining sector including the variable profit tax.

Mwansa said the revenue could not be pronounced in the just-released national budget for 2010 as the country’s revenue authority had not yet finished auditing the mining companies. He said ZRA was expected to complete the auditing by next year.

“…But you need to have trust in the institutions entrusted with this responsibility because we have the qualified staff whose ability has been enhanced over the years,” said Mwansa, adding that ZRA’s ability to track revenue from the mining sector went beyond the Zambia’s frontiers as provided for in the revenue’s Act.

Earlier, the parliamentarians complained that mining companies had continued to reap at the expense of the country following the abolishment of the popular windfall tax.

Luapula member of parliament Peter Machungwa said while it was acceptable for new mining projects like Lumwana Copper Mine to be given tax breaks, most investors like Vedanta Resources needed to pay normal taxes as they took over already developed mines.

“Even talking about waiting before starting to milk the cow…you find the cow will keep getting fatter while the country disintegrates,” said Machungwa.

At the height of the copper boom, the Zambian government introduced a new mining fiscal regime which aimed to increase revenue earnings from the country’s lifeblood with last year’s projection estimated at US $415 million.