Monday, March 10, 2014

Mucheleka counsels govt on windfall tax
By Kabanda Chulu
Thu 05 Dec. 2013, 14:00 CAT

GOVERNMENT should not continue betraying Zambians by refusing to bring back the windfall tax which is an easier way of collecting revenue from the mines, says Lubansenshi Independent MP Patrick Mucheleka.

Reacting to mines minister Christopher Yaluma that government has no immediate intentions to revise the mining taxation regime to bring back windfall taxes, Mucheleka yesterday advised government to take full responsibility by seizing the opportunity to reap maximum benefits from the extractive industries whose contents were a wasting asset.

On Tuesday, mining expert Dr Mathias Mpande said it was worrying that the country was only benefitting two per cent of revenue from the mines that only pay tax based on profits they felt comfortable to declare.

Dr Mpande said the country faces a leadership crisis in dealing with problems in the mining sector and that countries with good mining policies benefitted much from their minerals, citing Botswana's 50-50 shareholding as an intelligent way of sharing benefits from mineral resources.

"It is unfortunate and sad for the Zambian people that such sentiments are coming from a minister. In today's edition of the Post, there is a story quoting Ghanaian President John Mahama that Ghana will embark on a renegotiation exercise with companies especially those in the extractive industry on new stability agreements. This shows that Ghanaians have realized that the mines are making abnormal profits at the expense of local people," Mucheleka said.

"What is so special about mining companies investing in Zambia when everyone else is revising agreements to benefit from the super profits?"

He explained that some people, including government ministers, who were against windfall taxes do not understand how the system works.

"Mining companies will still make realistic profits because the windfall tax will only be triggered at certain price thresholds, besides it is a less complex way of collecting revenue whether ZRA has capacity or not, the country will still get something," Mucheleka said.

"Most of these mining companies are doing all sorts of things to avoid tax payments; they are also involved in tax evasion, tax avoidance and transfer pricing but with the windfall tax system in place, we shall capture correct revenue when the prices are triggered."

He said government had no choice but to do the right thing by bringing back windfall taxes.

"Government is borrowing money to build infrastructure, water facilities, and roads in areas where the mines are based. The mines are taking everything away yet government is subsidising the mines, for example, why should we continue talking about Chingola-Solwezi road which is in a dilapidated state but is used to transport copper ores for the mine?" asked Mucheleka.

"These same mines are subjecting our people to work under laborious and poor conditions, even their corporate social responsibility is poor because they usually donate a mini bus, sponsor a televised football match, they can do more but it is up to government to save people who are feeling the pinch."

Several people, including civil society and opposition parties, have called for the reintroduction of windfall taxes to increase revenue from the mines whose contribution to the national treasury is a paltry two per cent of GDP.

Recently, finance minister Alexander Chikwanda called those calling for reintroduction of windfall tax 'lunatics.'

In 2008, under Levy Mwanawasa, government introduced a windfall tax on base metals at a minimum rate of 25 percent with a revenue projection of at least US$ 415 million per annum.

For copper, the windfall tax was put at 25 percent at a price of US$ 2.50 per pound but below US$ 3.00 per pound, 50 percent for the next 50 cents increase in price and 75 percent above $3.50 per pound.

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