Refusing windfall tax is an injustice - Sardanis
Refusing windfall tax is an injustice - SardanisBy Joe Kaunda and Chiwoyu Sinyangwe
Fri 12 Nov. 2010, 04:00 CAT
Andrew Sardanis has described the government’s refusal to reinstate the windfall tax regime in the mining sector as an injustice to the country. And economic consultant Bob Sichinga has advised opposition political parties to make the issue of restoring windfall tax a campaign issue in next year’s general elections.
In an interview, Sardanis who presided over negotiations during the nationalisation of the mines under the Kenneth Kaunda administration, said he was appalled to learn that government was only getting 2.6 per cent in revenue from the exports of copper that stood at US$2.9 billion despite the huge boom in metal prices.
“…in other words a total tax of only 2.6 per cent of total revenue. When the mines were bought by the current owners, the copper prices stood around US $1,500 per tonne, but the price has shot up to the current over US $8,500,” Sardanis observed.
He described the low revenue from the mining sector to the government a huge anomaly and an injustice to the country especially that the global markets were still predicting a further rise in metal prices on account of an anticipated long term shortage of copper.
“It is an injustice for the government to only collect US$ 77.6 million from copper exports valued at US$2.9 billion. And I do not see that the mines themselves in their heart of hearts would consider it an injustice to pay extra more,” he said.
And further disagreeing with finance minister Situmbeko Musokotwane’s assertions that any changes to the current tax regime in the mining sector would chase away investors, Sardanis maintained that it was time government realised that the country was losing an opportunity to benefit from the remarkably high copper prices.
“Do you honestly think they (mines) are going to close down and leave? The reality is that at the moment there is predicted a long term shortage of supply (of copper) which would mean the price is likely to rise even further. So I do not understand why there are these fears of the investors leaving,” Sardanis stated.
“They (government) ought to realise that copper is a wasting asset, it is not going to grow in the ground again.”
He expressed concern at what would be a missed opportunity for the government to pass on the benefit from the mining sector into the socioeconomic development of the country.
And Sichinga, who has described President Rupiah Banda and Dr Musokotwane as unpatriotic for opposing the reintroduction of windfall tax, has charged that despite increasing pleas for maximising revenue collections from the mining sector, the government has continued to be adamant and irresponsible.
He said it was in this vein that campaigning on the platform of increasing tax collections from the mining sector would determine how serious the opposition political parties were to the governance of this country.
The mining sector which contributes about 70 per cent of the foreign exchange earnings and about 11.2 per cent of the country’s gross domestic product only accounts for just over one per cent of the revenue collections by the Treasury.
“I am suggesting that if political parties were serious, they should make this a campaign issue,” Sichinga said.
“They should say to the people that we are failing to get development because your government is not serious about obtaining the benefits of our God-given endowment to your country. So, if I were in politics, that is exactly what I would be saying. I will be making this a campaign issue that ‘the government is irresponsible, not being patriotic and failing to do what is necessary’. Why tax you and I at 35 per cent and tax the mines almost nothing?”
Sichinga said the re-introduction of the windfall tax should be also debated in Parliament and those members of parliament (MPs) who oppose it should be exposed and de-campaigned. He charged that President Rupiah Banda and Dr Musokotwane were not patriotic to this country.
“Why would any patriotic citizen or leader stop that windfall tax? That issue is so crucial such that the civil society and ordinary citizens will continue to argue they must impose that tax,” Sichinga said.
“I am also urging Parliament to reintroduce this topic and even if they get defeated, they must ask for a division and we must know which people are supporting the government over this failed and imprudent manner of taxing the mines. They should be named during the campaigns that these are the people who refused to have taxes imposed on the mines and let them go to the Copperbelt and campaign on that basis.”
He observed that the current regime favoured getting underhand payments from the foreign mining firms at the expense of the country.
“What justification is there? What is clear is that the government wants to benefit from these mines by them giving them campaign monies and that is why they are not imposing these taxes,” he said.
“There is no other reason. We have written, we have spoken, we have made our case… Dr Musokotwane, the president and their cabinet have not given us any justifiable reason why they mine should not being paying taxes.”
Sichinga also dismissed assertions by the government that windfall tax on the mining sector would scare away investors.
He said evidence has shown that countries that were increasing taxation in the aftermath of the global economic crisis remained stable as no investor had shown any signs of movements.
Sichinga also rejected Dr Musokotwane’s insistence on the application of variable profit tax as not feasible because the government does not understand the cost structure for most mining operations.
“In our country, the mines have different costs of production but the maximum you can expect from even the ones with the lowest ore content is not to go beyond U$ 2, 000 per tonne,” he explains. “That means they are making super profits between the US $2, 000 mark and the US $8, 000.”
He further dismissed the announcement that the government would audit mining firms for tax compliance.
“They are saying they are going to carry out an audit of what has been exported. It means they don't even know what has been exported at the moment,” said Sichinga.
“Otherwise why would they be asking for an audit now? What have they been doing all along? On what basis have they been taxing the mines in terms of the exports? It frightens me that you can have a government saying that they are going to carry out an audit and yet they are arguing that the mining companies would leave Zambia if they were to impose taxes.”
He reminded the government that with windfall tax, nobody would be taxing the mines when they made losses or when the copper price fell below an agreed level.
Labels: ANDREW SARDANIS, ROBERT SICHINGA, WINDFALL TAX
posted by MrK @ 8:43 AM
1 Comments:
and refusing ask dividends is injustice to the country too !
The boss of FQM said that ZCCM-IH had never asked dividends.
Yet Kansanshi mining give only 24 M$ dividends to zccm-ih, while in the same time the benefits for zccm is more than 350 M US$ after investment and tax !
why the board of zccm-ih no ask its money to kansanshi mining ?
why the prinicpal shareholder, the GRZ, no ask money ??
where is the money now ?
the board of zccm have not a correct attitude, it's an injustice for the country, for all zambians..
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