(STICKY) Dr Mpande urges removal of MMD over windfall tax
COMMENT - if you have an estate agent who cannot collect rent, what do you do with them? You fire them,” Dr Mpande said. - I couldn't have said it better. Also, the estate agent should be prosecuted for collusion and fraud.Dr Mpande urges removal of MMD over windfall tax
By Chiwoyu Sinyangwe
Fri 07 Jan. 2011, 04:00 CAT
DR Mathias Mpande says there is need for Zambians to remove the current regime over its failure to properly tax the mining sector. And Dr Mpande says the closure of Bwana Mkubwa mine after the unit exhausted mineral deposits is a clear warning of the potential fate most areas could face as the government continues to prioritise mining growth over economic development.
The international copper price has continued to surge to all-time high of within sight of the US$10,000 per tonne with analysts predicting the metal which is the country’s chief foreign exchange earner would touch beyond US$12,000 per tonne mark on the backdrop of increased global demand.
In an interview, Dr Mpande, the country’s prominent mineral economist, said there was no need for the government to continue disregarding calls for a taxation policy to enable the Zambian people benefit from the current high metal prices, which he warned would not last forever.
Dr Mpande said mineral resources belonged to the people and the government had a duty to collect rent on their behalf.
He wondered why Zambian workers were paying Zambia Revenue Authority higher taxes of about 18 per cent of their total income basket while the mining companies were contributing nothing.
“The government is like an estate agent and if you have an estate agent who cannot collect rent, what do you do with them? You fire them,” Dr Mpande said.
“And that is the attitude the Zambian people should have because the current government is not collecting rent on their behalf.”
And Dr Mpande said Bwana Mkubwa had closed with nothing to benefit the Zambian people who will be paying heavily for the environmental degradation left by mining operations in Ndola.
Bwana Mkubwa mine, owned by First Quantum Minerals (FQM) officially closed after it “exhausted" mineral deposits and had naturally come to the end of its life.
"That is the potential problem. Every mine will come to an end and the government doesn't even know when the mines would close," he said. "If you have a government that doesn't tax the mines, if the ore get exhausted, all you will have are big holes filled with water and mosquitoes breeding in them."
Dr Mpande's said the government's insistence on maintaining the variable profit tax at the expense of windfall tax was only abating cheating by mining companies and encouraging inside trading.
"How do you have a system that depends on the production cost of the mines when these same mines are also determining the price?" said Dr Mpande.
"Glencore buys the copper from its mine - Mopani Copper Mines, the Chinese parastatals own some mines here and they are they are the major suppliers of the mining equipment and capital and also buy the copper. That is inside trading."
Labels: MATHIAS MPANDE, WINDFALL TAX
posted by MrK @ 3:03 PM
1 Comments:
Today’s post (9th February 2011 Edition) makes interesting reading.
http://www.postzambia.com/post-read_article.php?articleId=18078
Now if the mine can cook books to say it sold copper at 25% the actual price, it means that it evaded 75% of tax since volume and selling price is lineally related to profit and consequently to tax on profit. Of cause it’s not as simple as that because the variable profit tax is an extra or windfall tax on mining profits. Variable tax is calculated as an extra 15% that companies pay on profits that exceed 8% of their overall income. This is in addition to the standard 30 percent corporate tax. All a cheating mine does is cook books by pushing up cost figures or by saying it sold at a lower selling price preferably under an “old” contract with copper buyers far less that the current London Metal Exchange prices. Such a mine can be hostile towards the auditors and postpone the audit exercise and refuse to answer queries despite the exercise being undertaken is in accordance with the ZRA Act. Now if you put this variable tax into consideration, it means the mine evaded paying more than 75%. This vindicates Dr. Matthias Mpande, lecturer in the School of Mines at UNZA who said the variable tax is not a good tax mechanism because the mines are making huge profits, but disguise the revenue in the consolidated financial results, and it is difficult for ZRA to calculate the actual taxes.
This is the reason why we advocate for reintroduction of windfall tax because it’s easy for ZRA to ascertain the tax due and its self regulatory without chocking the mining firms as evidenced in Zambia’s revenue earnings from copper sales in 2009 which fell to $2.9 billion from $3.6 billion the previous year despite increased output. That decline in earnings was a direct result of lower prices for the metal, which plumbed a low of $3,000 per tonne in the first quarter of 2009.
If my maths is correct, ZRA should be able to collect far more than $400 million in mining taxes annually through windfall taxes if reintroduced. But how much are we collecting now? Well around the same figure but most of it is an arrear from the windfall tax. So in essence, we are getting less than $40 Million. We are actually only getting 10% of what we could have got.
How can we talk about development when government pays a blind eye to multinational companies that conceal the true value of their operations with a mixture of secrecy and flawed laws passed by parliament depriving our country of revenue? Doesn’t government need a sizeable level of revenue to run and also invest in the social sectors of the country? May be not. May be it needs a sizeable number of individuals with pockets to be filled in by kick backs from multinationals to run government.
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