Thursday, March 22, 2012

(STICKY) Chikwanda describes advocates of windfall tax as lunatics

COMMENT - Is Guy Scott a lunatic? Is minister Robert Sichinga a lunatic? Is dr. Kaunda now a lunatic too? Is Andrew Sardanis a lunatic? (Also see here on Cho's blog: List of Prominent Zambians For A "Windfall Tax" On Mining). Because all the above advocated for the Windfall Tax before the election. Until the PF even start to collect all the taxes that are due even under the variable profit tax, and the dividends owed to ZCCM-IH, they have no right to call anyone who advocates for the highly effective windfall tax 'insane'. It seems to me more that the latest finance minister is a coward and just another shill for the mining industry. Has he been paid a little bribe so that the country can continue to be robbed for billions of dollars a year? How do 'donor countries' justify paying one cent of 'donor aid', which are their working and middle class and ordinary companies' taxes, when the government refuses to collect taxes from the mines, which are transnational corporations (Anglo-American De Beers, Glencore, First Quantum, Equinox, etc.)? Of course their own governments are captive of the TNCs, the IMF/WB and the trillionaires too. As a finance minister, you are there to serve the interests of the state, not the mines.

UPDATE (23/03/2012, 15:05 GMT/CAT): (POST) Mines should pay more tax - Scott; (POST) Magande questions Chikwanda's windfall tax reaction

Chikwanda describes advocates of windfall tax as lunatics
By Gift Chanda
Thu 22 Mar. 2012, 13:00 CAT

FINANCE minister Alexander Chikwanda has described as "lunatics" those advocating for the reintroduction of the 25 per cent windfall tax on base metals. And Chikwanda says people are becoming increasingly vocal because they haven't seen any meaningful change since the PF ascended to power.

Meanwhile, visiting World Bank managing director Sri Mulyani says the current strong fight against corruption may slow down national budget implementation. Speaking when Mulyani paid a courtesy call on him yesterday, Chikwanda said people think the mining sector alone could solve the country's budget financing challenges.

"There is a misconception by external people who feel that we can get more money from the mines. Even internally, they have been many lunatics who think we should involve windfall tax…but the production costs in the mines are very high," Chikwanda said.

[Oh shut up, you corrupt shill. Copper prices were never higher. If these lying scumbags from the mines can't make a profit when copper is $8000 per tonne, they should hand them back to the State, because President Kaunda kept the mines running when copper was $2000 per tonne. - MrK]


"When you factor in things like the sea and inland costs of exporting and even importing, by the time you get to the market the transport factor alone, especially the inland component will push you to something like US $450 to US $500 per tonne.

[That's a pimple on a donkey's ass, when prices are $8000 per tonne. If 'costs are too high' at $8000/tonne, then they should give the mines back to the state. - MrK]


So that is why we have involved the royalty tax but of course we have to be very prudent. Mining has a long gestation and we don't want to tax the mine out of existence.

[They never worry about taxing the middle class out of existence. Because right now, the Zambian middle class is paying more taxes than the mines. Again, if the mines can't make a profit at $8000 per tonne, they have no business owning them. Give them back to the state. - MrK]


So our taxation are quite balanced at the moment. In fact there are a lot of complaints from the mines on the government's hike in the royalty tax from three per cent to six per cent but we need to strike a balance."

Chikwanda said the country would need to use economic diversification to address the country's budget financing constraints.

[Which you can't finance without going into debt, if you don't effectively tax the mines with a windfall tax. All government projects are pipedreams, if they refuse to collect the taxes to pay for them. - MrK]


He, however, said the government would need to strengthen extension services and shift attention on maize production alone to achieve economic diversification.

"The revenue will come from diversification because if areas like agriculture can deliver then we can be there…we could channel those local resources we put in one crop into extension services and that would improve the productivity of small-scale farmers because if the small-scale farmers do things correctly and raise the agronomy, their production would increase," Chikwanda said.

[Timid crap. - MrK]


"But this also depends on zoning the activities. For example we have been promoting maize production in areas where the crop is not sustainable this has to be addressed…We need to do sensible things and grow things in areas that they can be grown more effectively."

He admitted that the PF was under pressure from Zambians to deliver on its promises.

"People are becoming increasingly vocal because they haven't seen any meaningful change so we are under pressure," said Chikwanda.

"The civil service is a bit slow…because levels of motivation are very low. But the commitments are quiet there, it is just a question of how you exercise the leadership."

But Mulyani cautioned the government on its strong fight against corruption.

She said national budget implementation, which was going to be key in the new administration's fulfilling of its campaign promises and sustaining the support of many Zambians, could suffer.

"Implementation of your budget is going to be very important especially that you are a new government. When I was finance minister I tried to address the issue of corruption but then it caused a slowdown in budget implementation because people were so scared of making decisions. They don't know how to get the trust of the new administration but at the same time have the confidence to execute the budget. So I suspect you are faced with a similar situation," she said.

Mulyani urged the government to accelerate the implementation of the budget, explaining that people would not be patient to forever wait for tangible actions to be made.

"The people expect the government to deliver…you have explained extensively what needs to be done, but I think the challenge still remains on how many of all those good ideas or frame works or concepts are you delivering and implementing? Your government was just elected now the people want the government to deliver what they think will really make real progress on the ground," said Mulyani.

Labels: , ,

7 Comments:

At 8:50 PM , Blogger MrK said...

This is what VP Guy Scott said about the Windfall Tax, before the PF ascended to government:

One of the attractions of the windfall tax to many commentators is its apparent objectivity. You take the amount of copper produced, multiply by the LME price in excess of the various “trigger points”, and alleluia, you have Zambia’s share of the action. By contrast, the system currently in force is heavily dependent upon taxing computed profits, and many people suspect that profits are less than objective. There is too much fudge-factor: non-transparent “hedging”; losses carried forward; so-called corporate responsibility expenditure; these and those allowances; transfer pricing; negotiated exemptions.

Let me emphasise that, viewed purely as a mathematical formula, the present tax regime, if applied objectively, would yield about the same revenue as was targeted by the windfall tax (i.e. 40 per cent plus of genuine profit). So there is no real argument about targets. It is the ability and will of the Zambian authorities to collect all of it – i.e. to hit the objective level - that is of concern to those of us who know our country. And after all, if countries that enjoy the advantages of sophisticated administrative machinery such as the UK can suffer from corporate evasion of profits tax, then how can we to be sure we can collect all that is due to us?

 
At 9:10 PM , Blogger MrK said...

This is what Minister Robert Sichinga said, in the article Windfall Tax Imperative, in the Lusaka Times:

Policy Consultant Bob Sichinga says it is imperative that the new government re-introduces windfall tax so that all Zambians benefit from the wealth in the mining sector.

Dr. Kenneth Kaunda said: ""Free education is not possible without you (the investors) paying tax, you are working so hard...without you it is not possible to provide free education," Dr Kaunda told Mr Janakaraj and other senior management staff during a briefing."

On both Andrew Sardanis and now Minister Robert Sichinga's statement on the need for the Windfall Tax:

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.

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.

 
At 12:34 AM , Blogger MrK said...

(THE POST) CSOs insist on 25% windfall tax
By Gift Chanda
Tue 27 Mar. 2012, 12:59 CAT

 
At 8:44 PM , Blogger MrK said...

From Chola Mukanga's blog, Zambian Economist:

New Mining Taxes?

Finance Minister Alexander Chikwanda recently signalled that Government is considering introducing new "tax measures" in mining :

"...We will introduce measures and relook at the tax system in the mining sector. Our mining sector has not contributed much compared to the rest of the region. So we want to engage local experts and ensure we have the statistics on mineral production and exports, and then we will find modalities to effect new tax measures to increase revenue collection..."

I commend Mr Chikwanda for his honesty that we are losing out. As well as his latest signal that change is on the way. Two additional observations on his statement.

First, the suggestion is interesting - but remains vague. What are these measures? We need details not merely promises of more study. It is not theoretical physics. These are straightforward issues. The obvious option is increasing revenue based taxes e.g windfall taxation or raising mineral royalties perhaps to 10%. Profit taxes do not work. Alternatively explore an infrastructure based tax that can be ring fenced to be spent in mining areas - that would be a win-win proposal for everyone. And it would ease pressure on mining companies for Corporate Social Responsibility projects. Which are mere bribes against citizens demanding higher taxes and better pay.

Secondly, any reforms must be done differently. I feel we are missing the basic point. The problem with our mining policies is that they are party political policies, not policies of the Zambian people. Mr Chikwanda must remember that to have good mining policies, it is not just about changing taxes or laws, it is how they are changed. Policies forced by PF without a Green Paper and public consultation will do nothing to build a lasting environment for growth because it will have no full buy-in of all Zambians. Lack of consultation and unilateralism is hurting our country in many areas.

We talk about "one Zambia, one nation", but in my view right now there's nothing "one nation", as far as mining taxation policy is concerned because successive governments have treated it as personal to order without people participation. As long as that continues every government that comes along will constantly alter its mining taxation policies because we people ownership. We need a Zambian solution, not a PF or NAREP or MMD solution. GRZ and investors have to realise it is in everyone's long term interests to push for transparency within a publicly agreed framework. Anything else is not sustainable. The approach should be consultative and transparent. Only that will deliver stability in mining policies and facilitate long term investment.

The next step therefore is for GRZ to set out a comprehensive national policy on mining. And consult with the people for a good period. Let us all comment and debate on it. And then let it be implemented after parliamentary scrutiny - and let it stand the test of time. Mining is too important to be left to the care of few individuals no matter how smart or well intentioned our politicians may be. It is a national issue.

 
At 7:07 PM , Blogger MrK said...

This is what happened to inflation in Zambia in 2015.

Inflation chart from Bloomberg Magazine.

 
At 12:30 PM , Blogger MrK said...

(THE MAST/THE POST) Zambia’s debt a time bomb, warns Mumba
by Staff Reporter
28th July 2017

NEVERS Mumba has revealed what he terms Zambia’s hidden debt crisis, which he says is a staggering US$30.4 billion mainly accumulated from 2011 to date.

On June 21, finance minister Felix Mutati, in a ministerial statement in Parliament, said Zambia’s foreign debt stock stood at US$17.2bn, a figure he corrected to US$7.2bn following much debate.

Mumba, the MMD president and former Republican vice-president, stated that considering that there is much confusion among Zambians on what the correct debt position was, his team conducted a research and concluded that the figure of $7.2 billion that Mutati gave “is simply not true”.

Based on evidence gathered from a variety of sources, we have found that the true figure appears to be at least four times larger than stated. Our preliminary figures, based on information in the public domain, show that at a minimum, the true debt position is about $33 billion,

Mumba stated.

“In 2011 when the Patriotic Front government took office, Zambia’s external debt stood at $3.5 billion (15 per cent of GDP). Using the government’s own figures, it has ballooned to $7.2 billion (34 per cent of an estimated $21 billion GDP) in 2017 and the year is not yet over. But the World Bank as of 2015 put the debt at $8.7 billion (by 2017 it is certainly around $10 billion). Using our computed figure of $33 billion, it is 157 per cent of GDP – 40 per cent is the government’s own acceptable threshold.”

He stated that his team’s computation did not include other loans for 2017 still in negotiations such as the Lusaka-Ndola dual carriageway, which would cost not less than $500 million and further does not factor in local debt (estimated at $4 billion) or arrears owed to contractors ($1.7 billion).

“We have also not factored in an estimate of unknown loans. We estimate that the grand total of all debts is anything from $35 billion to $40 billion,” Mumba stated.

He stated that to make his research more complete, his team also took into account debt servicing from 2011 to 2015 based on data from the World Bank, and added own estimates for debt servicing for 2016 and 2017.

“Also of note is the fact that the government has this year requested for an additional $8 billion from China to fund infrastructure development. This shall make the debt position far worse than anything imaginable for Zambia,” Mumba feared.



What is clear from all the information available is that Zambia is sitting on a massive debt time bomb that shall explode in a very big way within the next 5 to 10 years. Based on projections of current economic growth rates, Zambia will not manage to pay off those debts in a sustainable way. A sovereign debt default and significant credit rating downgrade is a very real possibility.

He stated that his team does not claim perfection in its research and there was a chance that there could be gaps in the information.

We therefore call upon Mr Mutati to issue another ministerial statement and shed light on this matter with the true debt position because it appears the Zambian government is being economical with the truth. Zambians need to know the real debt position so that they can anticipate what is coming ahead of us economically, stated Mumba.

“The IMF is already in negotiations with the government for a $1.6bn bailout and they also need to know the truth, the whole truth and nothing but the truth in order to determine how much they can lend you because they need to know our capacity to repay.”

 
At 12:30 PM , Blogger MrK said...

CONTINUED...

Below is the list of major loans contracted between 2011 and 2017

Kenneth Kaunda International Airport: $360 million (2014)
Poverty reduction projects: $13.5 billion (2012)
Poverty reduction programmes: $6.7 billion (2011)
750MW Kafue Gorge Lower Power Plant: $1.7 billion (2015)
360MW Kariba North Bank Power Plant Expansion: $430 million (2014)
Lusaka L400 roads: $300 million (2013)
Copperbelt International Airport (Ndola): $400 million (2017)
Lusaka de-congestion: $286 million (2017)
Communication towers: $280 million (2017)
Copperbelt C400 roads: $418 million (2015)
Chipata-Serenje railway line: $2.3 billion (2017)
Mongu-Kalabo road: $287 million (2011)
2,000 military houses: $157 million (2017)
Mansa-Luwingu road: $242 million (2012)
Water and sanitation programme: $135 million (2016)
Mbala-Nakonde road: $180 million (2011)
Lusaka sanitation project: $130 million (2015)
Kafubu water and sanitation project: $104 million (2014)
National Heroes Stadium: $94 million (2011)
Levy Mwanawasa Hospital expansion: $90 million (2015)
Kafulafuta Dam water project: $449 million (2017)
Housing project for security wings: $275 million (2015)
International Development Assistance programme: $600 million (2017)
Rural roads project (World Bank): $200 million (2017)
Environmental Remediation and Agribusiness Development: $106 million (2016)
Miscellaneous small loans: $300 million (estimate)
Debt position of previous government up to 2011: $3.5 billion

TOTAL: $33.5 billion



Annual External Debt Servicing


2011: $229.6 million

2012: $230.1 million

2013: $325.9 million

2014: $396.0 million

2015: $507.3 million

2016: $660.0 million (estimate)

2017: $800.0 million (estimate)

TOTAL: $3.1 billion

ESTIMATED NET DEBT: $30.4 billion (2017)

 

Post a Comment

Subscribe to Post Comments [Atom]

Links to this post:

Create a Link

<< Home