Maravi

(LUSAKATIMES) Zambia’s mining tax rate highest in region

Zambia’s mining tax rate highest in region
TIME PUBLISHED - Monday, August 6, 2012, 9:31 am

FIRST Quantum Minerals (FQM) Limited says the tax rates applicable to the mining industry in Zambia are the highest globally. Company head of tax Adam Little in an interview in Lusaka said FQM has from 2005 to date paid over K 9 trillion (US$ 2 billion) of taxes.

Of the total taxes paid, about K390 billion (US$ 84 million) is Pay As You Earn and K1.97 trillion (US$ 234 million) mineral royalties. Mr Little said despite the high taxes and high cost environment, mining prospects in Zambia remain bright for as long as Government does not try to kill the golden goose laying the golden egg.

“When you combine high existing taxes and high cost of production, it’s a country people will think twice before investing,” he said.

He described windfall tax introduced in 2008 as the worst tax he has ever seen, adding that it was retrogressive as it was charged on revenue rather than profits.
Mr Little said had the windfall tax persisted, a number of mines would have shut down at the time copper prices were high.

“I understand why people are calling for it (windfall tax) because they see what looks like a healthy industry and they see a contribution from the industry which isn’t high enough,” he said.

He said some companies are paying lower tax than people expect due to huge investment following privatisation.

[Privatisation was over a decade ago. - MrK]

Mr Little said once a number of companies reach tax paying levels and copper prices on the international market improve, tax and mining profits are expected to improve.

He said there is need to also improve capacity and capability levels of the Zambia Revenue Authority to collect taxes from the mines.

“Government should encourage future development, I don’t think that means offering individual incentives to the mines “No sweetheart deals” but coming up with consistent and fair tax environment,” he said.

Mr Little said because of the huge investments involved in mining, it is prudent that tax rates are stabilised as was in the old development agreements.

He said to operate new mines, citing the Trident project that includes Sentinel, Enterprise and Intrepid copper projects, one has to be efficient to control costs.

“Any additional taxes will make the next generation of mines that run on slim margins of copper very hard to succeed,” he said.

[Poor mines. - MrK]

Commenting on corporate social responsibility, Mr Little said FQM has been involved in upgrading of the local general hospital, Solwezi technical institute, upgrade of the Solwezi-Chingola road, sports development in Solwezi and was the major sponsor of the African Cup of Nations.

“As much as it is important that our corporate social programmes get through to the media, the big thing for us is tax contributions. Once the mines pay tax, the money is in the hands of Government and how it spends that money is between the citizen and Government,” he said.

[Zambia Daily Mail]

Labels: DEVELOPMENT AGREEMENTS, FIRST QUANTUM MINING, TAXATION, WINDFALL TAX

posted by MrK @ 3:58 AM