Sunday, December 15, 2013

Chikwanda to blame for Si 89 - Mpande
By Abel Mboozi, Gift Chanda and Chiwoyu Sinyangwe
Wed 30 Oct. 2013, 14:01 CAT

COMMENT - Team Lunatic 1, Team Sound Minds 0

Prominent people on the Windfall Tax, before the elections. And start prosecuting the former Finance Minister, who kept talking about 'future profits', when he knew very well the extent of tax evasion, including the underdeclaration of profits by the mining corporations. -MrK

THE government will lose income from Kansanshi following the revocation of the Statutory Instrument permitting export of copper ores and concentrates tax-free, says finance minister Alexander Chikwanda.

Meanwhile, Dr Mathias Mpande says Statutory Instrument 89 which allowed mining firms to export concentrates tax-free squarely rests on Chikwanda.

President Michael Sata on Monday directed that SI 89, which suspended 10 per cent export duty on copper ores and concentrates for one year, be reversed.

Chikwanda yesterday appeared before the expanded parliamentary committee on estimates in the company of Secretary to the Treasury Fredson Yamba and finance permanent secretary in charge of budgeting Pamela Chibonga.

Chikwanda said the Ministry of Finance had realigned Statutory Instrument 89 in line with President Sata's directive that it be revoked although the move would result in revenue losses.

This was in response to Monze UPND member of parliament Jack Mwiimbu, who asked Chikwanda to be categorical on whether SI 89 had been revoked in line with President Sata's directive.

Mwiimbu wondered what would happen to stockpiled mineral concentrates since the Chamber of Mines of Zambia last week said Zambia had no capacity to process concentrates as they needed to be commingled to be processed in the three existing smelters in the country.

In response, Chikwanda said: "Honourable Mwiimbu is correct; we have realigned the SI which should have been in force up to next year September. It's a complex issue on concentrates because Kansanshi Mine is building a smelter to process but it will take a year or more to complete and so there will be no income as concentrates will not be processed locally."

Meanwhile, chairperson of the committee, Highvie Hamududu, assured the minister of Parliament's support on such a move once brought to the House.

Chikwanda said the government was aware of such an anomaly where Zambians were not benefiting from their mineral wealth.

Members of the committee also wondered whether the government could consider reintroducing windfall tax, which was a sure way of maximising profits from the mining sector.

Chikwanda, in response, said there was extensive fraudulence in the mining sector, where players were quick in declaring losses even when they had made huge profits.

He said the government could no longer ignore concerns by majority Zambians that the nation was being 'robbed' of its mineral wealth by investors.

"Mines are not renewable like agriculture, and so we need our citizens to benefit more from this sector. We need to come up with a tax that will compel mining houses to pay whether they have made profit or not; that's their own business," Chikwanda said.

"We are reinforced with your views as a Committee. We shall subject this to MPs and we hope it shall be supported. We feel now we have been put under scrutiny over mine taxation.

A member of the committee Kapembwa Simbao said the taxation structure for the mining sector in Zambia favoured mining houses who tended to manipulate profit figures.

Lukulu West MMD member of parliament Dr Christopher Kalila said it was gratifying that Chikwanda and the government were taking ownership of the mines by imposing taxation that would benefit Zambia.

And Dr Mpande, who is also chief Mpande of the Mambwe people of Mbala, said senior ZRA officials were sacrificed over the responsibility that should have been solely absorbed by Chikwanda.

Revoking SI 89, which Chikwanda signed on October 4, President Sata admonished Zambia Revenue Authority commissioner general Berlin Msiska and commissioner of customs Dingani Banda for allegedly advising the finance minister wrongly.

SI 89 reversed the November 2011 decision of the PF government to impose a 10 per cent export duty on copper ores and concentrates.
Commenting on the matter, chief Mpande, a mineral economist and former dean of the School of Mines at the University of Zambia, said Chikwanda misinformed President Sata to believe ZRA misled him into signing the Statutory Instrument.

Chief Mpande, a former deputy minister of mines, was also a lead consultant for the establishment of the Audit Unit for large scale mining at the ZRA.

He is currently a board member of the Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), a parastatal which holds shareholding in mining companies on behalf of the government.

Chief Mpande said SI 89 was solely the work of Chikwanda.

"I don't think there was meaningful discussion by the minister with anybody else at Bank of Zambia, ZRA or Ministry of Mines because they could not have supported that legitimately," Dr Mpande said.

"But you know, the Minister of Finance has become so powerful that he can do anything he thinks. He is borrowing money whenever he needs and yet he is allowing concentrates to go at zero tax. I think the minister is lying when he says he acted on advice of ZRA because I know Zambia Revenue Authority sufficiently and fundamentally."

Dr Mpande said senior ZRA officials were sacrificed over responsibility that should have been solely absorbed by Chikwanda.

"I know the Commissioner General Msiska and just last week, he was telling the Parliamentary Committee on estimates that mining sector was not contributing sufficiently to the Treasury and his vision is to raise revenues from the mining sector," he said.

"Msiska is probably the best person you would ever have at ZRA because he is very qualified and experienced. He was employed by International Monetary Fund (IMF) to be in charge of and help IMF improve taxation in Africa. That's how highly rated he is and he was based in Mauritius, which is the foremost advanced financial country in Africa. The PF brought him Msiska back at ZRA to improve revenue collection and improve the expertise, honesty and integrity. So, the minister cannot do that SI with the support of Msiska. So, the minister is not telling the whole truth."

Dr Mpande said if Chikwanda's decision had not been reversed by the President, it would have hurt the country's economy and also aided mining firms to avoid paying taxes to Zambia.

"We are just abetting the dishonesty of the mining companies if we allow them to export concentrates without penalties," he said. "In fact, for me, we should not just impose export duty but we should completely ban the export of ores and concentrates."

Dr Mpande accused Chikwanda of putting the interests of mining firms first at the expense of the country.

"Between the President and the minister, you can tell who is working in the interest of the country," chief Mpande said. "The President did broader consultation and has broader knowledge…it's not the so-called economic education. You don't have to have a degree in finance which the minister says he has. You just need to be sensible; it's about being nationalistic and patriotic. So, you tell him Chikwanda that chief Mpande is in full support of the President's decision."

Chief Mpande also said Chikwanda was pursuing interests of the foreign mining firms at the expense of Zambia.

Dr Mpande also dismissed the arguments that Zambia lacked sufficient refining capacity for copper, accusing mining firms of wanting to siphon minerals out of Zambia by hiding them in concentrates.

He said concentrates were less than 30 per cent processed copper while 70 per cent comprised other minerals that would be exported without taxation or verification.

"If there is no capacity, then they should build their own smelters," chief Mpande said. "After all, Kansanshi is a very rich company. They are exporting more gold than copper. The refinery only costs about US$400 million but at Kansanshi, FQM is making billions of US dollars. So, if there is no capacity to refine their copper, let them reduce their mining. If they are mining but they are not paying tax and not increasing employment, why should they be allowed to do what is wrong to the country economically and financially?"

He said it was not sensible to allow export of concentrates at a time most key mining operations were mechanising and cutting back on employment levels.

"Since we are not benefitting from increased employment because of technological changes, we need employment in our refineries," said Dr Mpande.

"Now people want to export raw materials and the minister thinks he can encourage that? Even those so-called copper concentrates, they comprise cobalt, gold, and many other minerals. So, I don't know the wisdom of the Minister of Finance to encourage that type of exports. It's harmful to the economy and to our fragile infrastructure because raw minerals are sometimes 50 tonnes heavier and then you are exporting them on the roads."

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