Sunday, December 15, 2013

Quashing of SI 89 pleases Kaingu, Magande
By Gift Chanda and Abel Mboozi
Thu 31 Oct. 2013, 14:01 CAT

MICHAEL Kaingu says the MMD is very happy with President Michael Sata's strong stance against Statutory Instrument 89 that permitted exports of copper ores and concentrates tax-free.

And Kaingu has questioned finance minister Alexander Chikwanda's logic on his statement that government will lose out revenue from revoking Statutory Instrument 89.

Meanwhile, Ng'andu Magande who on Monday raised concern over the scrapping of the 10 per cent duty on mineral ores and concentrates has commended President Sata for revoking SI 89.

And Speaker of the National Assembly Dr Patrick Matibini has directed Chikwanda to explain the financial implications of the revocation of SI 89.

President Sata on Monday directed that SI 89, which was signed by Chikwanda on October 4, suspending 10 per cent export duty on copper ore and concentrates for one year, be reversed.

The government introduced the export tax on raw metals in November 2011 in a bid to encourage the development of local industry and to add value to the economic chain.

The tax made exporting copper concentrates less profitable, encouraging mines to use local smelters.

But Chikwanda, during an appearance before the expanded parliamentary committee on estimates on Tuesday, said the government would lose income from Kansanshi following the revocation of the Statutory Instrument 89 permitting mining firms to export concentrates tax-free.

Chikwanda said the Ministry of Finance had realigned SI 89 in line with President Sata's directive that it be revoked although the move would result in revenue losses due to low smelter capacity locally.

But Kaingu supported the decision by President Sata to have the 10 per cent tax on copper ore and concentrates brought back as Chikwanda could not have the luxury to continue giving tax incentives to the mines given the country's deteriorating fiscal position.

"When you export copper ore, you are actually not only exporting copper but other minerals. I tend to agree with President Sata and I am glad that he has come out strongly; it is not only me but many of us in MMD. We have been wondering why the mines were being allowed to ship out copper ore when we have many smelters in the country," he said.

"It has been proven that copper ore has many other minerals integrated, you find gold for example, and there is no way we should be allowing this to go untaxed."

Kaingu said Chikwanda's defence of SI 89 does not hold any water because the without the 10 per cent duty in place, mining firms would have continued to rob poor Zambians of the necessary revenues for development.

"I don't understand what the minister is saying because how can you lose revenue by allowing exports of ore tax free when the same ore contains so many other minerals?" he questioned in an interview.

"So much revenue that could have been collected on the other minerals that are contained in the ore was going to be exported tax free. So I do not understand what the minister means when he says the country will lose out."

Kaingu said many poor Zambians needed services but resources were scarce.

He said it was ironic for Chikwanda to borrow huge amounts of money from international sources to finance government expenditure when there was an opportunity to raise revenue from the mines through the 10 per cent export duty on copper ore and concentrates.

"...there is no way you can ever think that by exporting copper ore tax free you are helping the country," Kaingu said.

"When you look at our budget you cannot allow tax free exports. Look at the deficit of 8.5 per cent instead of 4 per cent. Look at our indebtedness, the local debt is 13 per cent, the national debt is 12 per cent, where are we getting the luxury to give away taxes? I don't think there should be any tax freedom for anybody. We have lost luxury particularly in our mining sector because it is one of the sectors that is doing well."

He said Zambia was lucky that despite the drop in copper prices, the fall had not been excessive.

"Besides, copper production has been very good. So what should be the reason for tax rebates? I don't see it myself," Kaingu said.

And Kaingu said he did not believe Chikwanda could have be misled by officers at the Zambia Revenue Authority.

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

"The truth of the matter is that Chikwanda is a highly qualified person in that job. He is doing it for the second time, I don't think he can be misled by his officials," said Kaingu. "I tend to disagree with that allegation that he was misled."

And Magande said Chikwanda needed to tell the nation how much the county was going to lose following the revocation of SI 89.

"If the minister is saying the country will lose money, let him get the details because that is what his officials are paid to do," he said.

"When they were putting this SI, they were supposed to work out the details of how much we are we going to lose. So if he says we will lose revenue, let us see the numbers in which case perhaps some of us who are not so close to what is happening will not miss out," said Magande.

And responding to Kaingu's point of order raised on Tuesday on whether the revenue from the mines through the imposition of export duty on ores and concentrates would be factored into the budget, Speaker Matibini said he had adequately studied the point of order to warrant a ruling.

In his ruling, Speaker Matibini explained that the point of order emanated from the customs and exercise (ores and concentrates), export duty (suspension) regulation 2013 as Statutory Instrument no 89 of 2013 which was issued on October 4, 2013, by the finance minister.

He said the SI in question suspended the levy of export duty on ores and concentrates from October 4, 2013 to September 30, 2014, and that the operation of the SI thus meant revenue loss to the government during the period that the law would be in effect.

"However, I wish to inform the House that on Monday October 28, 2013, Chikwanda issued a customs and exercise ores and concentrates export duty suspension amendment regulations 2013 being SI no 99 of 2013 which amended SI no 89 of 2013," Speaker Matibini said.

He explained that SI no 99 of 2013 therefore reduced the period of suspension of export duty on ores and concentrates to October 25, 2013.
"Effectively, SI 99 of 2013 has revoked the SI 89 of 2013. Honourable members, I therefore direct the Minister of Finance to explain the financial implications of this measure," said Speaker Matibini.

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