Thursday, December 31, 2009

Zambia to keep low mine taxes despite pressure

COMMENT - The MMD is deeply corrupt, and it is costing the country billions of dollar a year in untaxed profits. It is not to politicians to sell out the country's resources for a bribe. Whoever gave Lumwana tax exemption to 2017 is a criminal. People are dying because lack of money in hospitals and lack of general development. And yet, these MMD politicians think it is better that they receive bribes than that their people live. I would go beyond raising royalty tax from 3% to 20%. I say - let's declare a few profit-free years for the mines, and tax them the $2.4 BILLION they drag out of the country every year.

Zambia to keep low mine taxes despite pressure
By Chris Mfula
Tue 29 Dec. 2009, 09:00 CAT

LUSAKA (Reuters) - Zambia, Africa's top copper producer, reiterated on Monday it will maintain existing mining taxes despite growing internal pressure on authorities to raise them in 2010 following a rally in metal prices.

Chief government spokesman Ronnie Shikapwasha said Zambia would maintain the existing tax regime introduced in 2008 as the global economy was just starting to recover from recession.

The International Monetary Fund and World Bank have said Zambia should further raise mining taxes and should not have abolished a 25 per cent mineral windfall tax this year.

"We need to allow the mines to develop and re-create employment for our people and that is why we (provided) existing tax concessions. We may revisit the agreements in future as the mines pick up," Shikapwasha told Reuters.

Foreign owned mining companies are currently expected to pay a 15 per cent profit variable tax, 30 corporate tax and 3.0 per cent mineral royalty.

But last year, Zambia signed an agreement with Lumwana Mining Co., a unit of Equinox Minerals, granting it tax waivers up to 2017 to enable the company to pay back its debts and also still provides exemptions to other firms investing in established economic zones.

Senior mining economics and engineering lecturer at the University of Zambia (UNZA), Mathias Mpande told Reuters the country should scrap the tax breaks in order to raise more revenue following a rally in metals prices in 2009.

"The colonial government used mining to create industrialisation elsewhere and we cannot continue mining in that pattern. The revival of mining is being based on the false concept that the state does not tax the mines," Mpande said.

Mpande said apart from the lengthy tax breaks, mining companies were paying lower power tariffs to the state power utility, Zesco Ltd, compared with other industry.

Economic analyst, Oliver Saasa said the agreements with the mines should quickly be renegotiated because the tax regime was more favourable to the foreign investors than the country.

"The government must sit down and renegotiate with the mining houses because the tax holidays given to the mines appear not to take into consideration development needs of the country," Saasa told Reuters.

Foreign mining companies operating in Zambia include Canada's First Quantum Minerals, London-listed Vedanta Resources Plc, Glencore International AG of Switzerland and Metorex of South Africa.

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