Monday, December 30, 2013

'All they want is zero tax'
By Editor
Mon 04 Nov. 2013, 14:00 CAT

IF it was left to the mining corporations to determine what taxes they should pay, we have no doubt most of them would pay zero.

And Miles Sampa is right when he says "all they want is zero tax". We should not deceive ourselves in any way that the mining corporations are here to serve the interests of the Zambian people. These are not charitable organisations. They are here for a profit - and their mission is to maximise that profit.

It is up to us and our leaders to make sure we get a fair share of the rewards of mining. If we don't, we will get very little, if not nothing.

And in this regard, Nelson Mandela in June 1998 gave very timely advice to the political leaders attending the Organisation of African Unity summit: "It would be a cruel irony of history if Africa's actions to regenerate the continent were to unleash a new scramble for Africa which, like that of the 19th century, plundered the continent's wealth and left it once more the poorer."

It shouldn't be forgotten that this country's first coloniser was not the British government but a mining corporation - the British South Africa Company. This company governed this territory, the territory we are today calling Zambia, from 1891 to 1924. What did this company do for us? Nothing. It simply enriched Cecil Rhodes and its other shareholders. Things improved a bit more for our people when the British colonial office took over the administration of the territory.

We therefore know what corporate rule means. And Sampa is right in urging the government to ensure it has full control of the country's economy and assets.

It's not difficult to see through First Quantum Minerals' scheme of stockpiling concentrates, creating a crisis and then seeking to benefit from a self-created situation. They knew what they were doing. They were piling up these concentrates, as Sampa correctly observes, so that in the end, they build a strong case to force the government to forgo taxes on it.

If we are to harness our mining resources for human development, we have to secure a fair share of the wealth now being drained out of our country through unfair and sometimes illegal practices.

The ultimate measure of natural resource is the benefit that it generates for our people. We can see the gap between economic growth as a result of copper exports and the weak progress in human development.

The economic growth the statistics give us is not tying up with the reduction of poverty. Economic growth should result in the improvement of people's living standards. It's meaningless to develop a country without developing the people. Economic growth should be for the benefit of the people. To close this gap, our government needs to spread the benefit of our natural wealth by mobilising revenue through taxation, and by investing it efficiently and equitably in public goods. This requires a taxation system that combines incentives for investors with fairness for our people.

We also need to realise that the mining industry typically operates an economic enclave, with few links to our local firms and employment markets, and little value added in production. Strengthening linkages and adding value are critical if the benefits of mining are to be spread more widely.

Taxation is here a case in point. We have to review the current mining tax regime in the light of prevailing world market conditions. Of course, creating incentives for high quality investment is critical and we can't ignore this. Given the large initial capital costs and the long-term investment horizons involved in the mining sector, it is also important that we create a stable and predictable environment for investors.

There is something seriously wrong in the way we are taxing mining corporations. The current tax regime suffers from several failings. We signed too many concessions with individual mining investors which are increasingly becoming difficult to harmonise and administer. Multiple tax structures do not make for efficient administration. There isn't much benefit or advantage in case-by-case negotiations with investors.
And whatever benefits are there, their significance is exaggerated. They pitch government into negotiations on the potential profitability of a deposit with investors who are likely to be better informed. Adherence to a general tax structure is the rule in Latin America and much of Asia.

We need to pay special attention to the concessions we offer mining corporations. And some of the concessions we have offered need review. Most of the concessions we offered in the 1990s no longer make sense in today's market conditions. In this era of high and rising prices, they are excessively generous.

Clearly, our leaders need to think much more of the future. It is possible to exhaust our minerals with very little to show for it in terms of development. Look at how many years copper has been mined in this country! What is there for us to show for over 70 years of mining?

It's important for our leaders to think about the future and the future generations. What will the future generations find or benefit from our mineral resources which belong to us as much as they belong to them?

We think that the idea of the future is the most important and most noble that any honest, serious, progressive and revolutionary leader can harbour. Good leaders have always fought for the future. But the fight for the future does not mean avoiding doing every day what must be done for the present.

We need to collectively develop coherent, long-term strategies that convert our temporary natural resource wealth into permanent human capital that can expand opportunities across generations of Zambians. There is need for those involved in all these processes and activities to adhere to the highest standards of transparency and accountability.
Without this, corruption will be rampant. Those with the responsibility to make policy and administer it will be selling it for money, for bribes, kickbacks. Highly questionable decisions will be the order of the day. And if they can get away with it, they will continue to do it - for a few million dollars put in their pockets, they will make their country and their people lose billions of dollars in revenue.

And there is also need to protect communities and the environment by assessing the potential impacts of mining activities. Here again, transparency and accountability is a must because all these can be ignored if money, bribes, kickbacks are paid to those who make decisions.

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