Maravi

‘Govt ‘somersaults’ over windfall taxes are costing the country’

‘Govt ‘somersaults’ over windfall taxes are costing the country’
By Chiwoyu Sinyangwe
Tue 23 Feb. 2010, 04:00 CAT

THE dangerous ‘somersaults’ by the current government over mine windfall tax which they heavily supported when they served under late president Levy Mwanawasa is costing this country dearly, Charles Milupi has observed.

Following the abolishment of the windfall tax which was meant to save the local mining sector from the effects of the depressed international metals, there has been mounting pressure on the government to reintroduce the popular tax as the global demand for copper surges the price.

The heightened calls for the government to reintroduce the windfall tax comes on the backdrop of recent revelations by Bank of Zambia (BoZ) that the country last year only earned US $77 million in tax revenues from copper sales of over US $2.9 billion.

With the abolishment of the 2008 mining fiscal regime, the government has this year not projected how much it intends to earn in form of taxes from the expected copper sales revenues of US $2.9 billion.

Milupi, who is Luena independent member of parliament, last week observed that the country had lost an estimated US $600 million in mine tax revenues following the government's abolition of the windfall tax last year.

However, Milupi’s statement drew sharp reaction from mines minister Maxwell Mwale who said the abolition of the windfall tax last year was done to save the mining sector.

Mwale said the MMD government had made a decisive decision to safeguard job losses in the mining sector.

"We had to maximise the benefits. It is either we got an instant gratification from the windfall tax and make US $600 million as he says or we see a decline in the mining sector. The key issue is that with windfall tax you kill exploration. So with no discoveries there would be no developments in the mining sector, we had to take a long-term view of the industry," said Mwale.

But Milupi maintained the country had lost over US $600 million following the abolishment of the 25 per cent windfall tax on the mining sector, which was targeted to trigger at US $2.5 per cent pound.

“When the MMD government came to Parliament to introduce the windfall tax, how did they calculate US $400 to be earned that was between April and December, money they said would not be used but kept under table,” Milupi wondered.

“Maxwell Mwale was deputy minister of mines and he knows it very well. In any case, it is very simple. You base your calculations on the price of US $7,000 a tonne and then you look at production projections from the mines… anybody can sit down and work out that at the price threshold of US $2.5 a pound.”

Milupi accused the current government of reducing an important exercise like mine taxation to mere political rhetoric.

He accused the government of lacking consistency when it came to implementing policies to govern the mining sector in the manner that could benefit the country and investors.

“They are playing politics because these are the same people who brought this to Parliament,” he said.

“Like Mwale, he was deputy minister when this government came to Parliament, the current President Rupiah Banda was the Vice-President and they cheered Mwanawasa when he was making the speech. Later, they cheered Ng’andu Magande when he presented the budget. So, it is those that have changed… somersaulting…who are playing politics? But this playing politics with the most important resource is costing the country heavily because we are losing an opportunity to benefit from our own resources. In fact, I am just supporting their earlier decisions. I think it was a damn good decision and it won us accolades throughout the world.”

Milupi said the inconsistence in coming up with sustainable long-term policies to govern the mining sector had rendered the country a laughing stock among its peers in the extractive industries led-countries.

“Everybody was saying it is a good move we made and these are saying ‘we praised you but now what has changed? Is it the death of Mwanawasa? Where is the continuity? Where is the keeping of the promise,” questioned Milupi. “And we were now … beginning to be in comparisons between Zambia and Ghana in terms of what the government had done to ensure that Zambians gain from its own resources. At the same time, the issues of Nigeria were being highlighted as the other side in terms of oil revenue which had not benefited the local people.”

Labels: CHARLES MILUPI, CORRUPTION, WINDFALL TAX

posted by MrK @ 12:53 AM