Maravi

Rupiah does not understand windfall tax, says Magande

Rupiah does not understand windfall tax, says Magande
By Chiwoyu Sinyangwe
Mon 17 May 2010, 04:10 CAT

PRESIDENT Rupiah Banda’s continued insistence that the government will not reintroduce windfall tax despite current high metal prices clearly shows that he has no plan for this country, Ng’andu Magande has observed.

And Magande has said the violence being perpetrated by MMD as evidenced during the Mufumbwe by-election poses more threat to foreign investors than a higher tax regime.

Last week, President Banda maintained that the government would not reintroduce the 25 per cent windfall tax despite continued call on the government to reintroduce the popular tax regime of 2008 to enable the country benefit from the current high metal prices which were beyond the US $2.5 per pound trigger point for the windfall tax.

President Banda said people calling for the reintroduction of the windfall tax did not understand governance of the country and higher taxes might trigger capital flights from the country’s mining sector.

But Magande said President Banda was opposing the windfall tax because he did not understand it and he did not have any agenda for the country.

“It’s really a pity that we are going this way but anyway like some of us know and as we have been told, the current leader said he was just asked by somebody to stand, so, obviously after agreeing to stand, I don’t think he set out a plan to work on what he wanted to do for the country,” Magande said.

“So, he is just moving according to the wind. Whoever says whatever, he says ‘that is okay.’ Where did he campaign about his agenda? When he was campaigning he was saying ‘I am going to keep Mwanawasa’s legacy.’ Did you hear him saying I am going to improve on Mwanawasa’s legacy?

All these things that are being done…this youth centre Olympic Youth Development Centre (OYDC) which is being done here. It was signed for in 2006 with Olympic Committee. So, he is just finishing off and inaugurating things, which were done. They are not interested in crediting us. Where have they ever invited me? They think people will forget that I was part of the Mwanawasa’s economic team and many others. There is no way to just rub history. You can’t. But you see the future has to be planned for.”

Magande explained the windfall tax.

“A windfall tax means therefore this person has already recovered his expenditures. He has already worked out the normal profit, he is now getting a windfall profit. And that is what you say, can we share more?

That is the simple accounting formula. So, when someone says we can put windfall tax on profit, he doesn’t understand what a windfall revenue is. He should start windfall revenue,” he said.

Magande said the recent dip in form of kwacha against major convertible currencies was symptomatic of high profit repatriation by mining companies.

“We were told the first quarter copper production has gone up,” Magande said.

“If copper production has gone up and we are aware the prices a month ago were the highest for copper in 20 years, so, prices of copper are up and the quantities produced are up and then you find that the exchange rate…the kwacha is depreciating. How does our kwacha depreciate when we are getting more foreign currency? In fact, we are getting more foreign currency, so if someone wants to sell the foreign currency in kwacha, they should be getting less kwacha but that is now when the kwacha is hitting K5,000 against US which is a record. Something somewhere is not being planned properly.”

Magande dismissed claims by President Banda that the country did not benefit anything from the higher tax regime of 2008 because officials from Ministry of Finance told the parliamentary public accounts committee that all the mining companies that were assessed for the windfall tax payment still owed the government about K1 trillion in outstanding taxes, apart from K390 billion the government already collected.

“How did windfall fail to work? How did we get the K390 billion if it failed to work? Just quote finance minister Dr Situmbeko Musokotwane’s speeches in Parliament? Ask Musokotwane that ‘why were you cheating the country when your President says we got nothing? When there is money that was being put in special accounts by some of the mining companies which were still resisting. Then there are those who are in arrears. Why are you cheating the country when your President says this windfall tax we introduced in 2008, we got nothing,” Magande said.

“Why is the President saying we got nothing when Secretary to Treasury Likolo Ndalamei said we got K1 trillion in outstanding taxes? If you sell something to somebody and they say I will pay you next week, and when someone else comes and says ‘oh! Why don’t you go and get some more fish,’ you say that ‘I don’t want to go and get some more fish because I got nothing’. And yet in trade stocks, you owed one K1 billion. How?”

Magande said instead of President Banda being worried about capital flights from the mining sector, he should be worried about resource flight because that belong to the Zambian people.

“I heard the story that this will cause capital flight, now we don’t even have capital flights. We have resource flight. Our copper, cobalt is going and we are not benefiting and this is the flight that we want to stop,” Magande said.

“But later on, since more copper is being exported and the prices are high, the income which is being realised is also flying. It has gone. That is why the kwacha is losing value. So, already there is flight of everything and they say ‘no we are looking to the future.’ They keep on saying we want to encourage the business people to do exploration.

They are not exploring now. They are actually mining and taking away the copper. In any case, exploring means to discover…that is an exercise to discover new minerals. Who want to discover more minerals than what we have now? We were projecting by end of this year to be producing one million tonnes of copper cathodes. Can you imagine if Zambia was able to produce one million tonnes of copper cathodes and the country got half of that money in the country? Why do you want to mine all your minerals at once? What will happen to our grandchildren? So that there are big Nchanga Open Pit holes as quickly as possible? Who is going to admire the holes? What will they benefit, ourselves and our grandchildren in the future?”

Magande laughed off mines minister Maxwell Mwale’s statement that the introduction of super profits tax on the Australian mining sector would help Zambia to benefit from investors that would flee the higher taxes in that country.

“In Australia they have realised that this capital equipment will be productive in 2012, so, they are saying to these people you finish your investments but in 2012 when you will be at your peak of your revenue, we want to get your windfall tax,” said Magande.

“Do you think somebody now there who is already doing some trials on the mine would close the mine that I don’t want to pay that tax?...They will come to Zambia because of what? Because of beating people in Mufumbwe? Who wants to come to a country where just a by-election in one rural area, people are even being killed?”

Labels: MAGANDE, POLITICAL VIOLENCE, WINDFALL TAX

posted by MrK @ 3:45 AM