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The Post Newspapers Zambia
Mucheleka, Namugala want windfall tax re-introduced
By Abel Mboozi on Friday 29 November 2013, 14:00:00 CAT

LUBASENSHI Independent member of parliament, Patrick Mucheleka and his MMD Mafinga counterpart, Catherine Namugala, have called on the government to re-introduce windfall tax on the mines.

In their separate debates in Parliament on Wednesday, the two backbenchers said it was wrong for the government to incur a huge external debt when it could raise more money from the mines.

Levy Mwanawasa's government in 2008 introduced a windfall tax on copper at 25 per cent owing to the sector's low contribution to government revenue which still stands at less than two per cent.

According to then finance minister Ng'andu Magande, the government expected to earn at least US $415 million annually from the windfall tax as mining companies accounted for over 80 per cent of the country's export earnings.

However, Rupiah Banda's government in 2010 scrapped the tax amid calls from civil society and opposition political parties to have it maintained.

And the Patriotic Front, during its campaigns, promised to re-introduce the tax, but finance minister Alexander Chikwanda last year categorically indicated that the windfall tax would not be brought back and called those calling for its re-introduction 'lunatics'.

The House on Wednesday voted for a motion moved by Chikwanda that, in terms of section three of the Loans and Guarantees (Authorisation) Act 366 of the Laws of Zambia, Parliament authorises him to increase by statutory instrument the amount outstanding at any given time on external loans from K20 billion to K35 billion.

In his debate on the motion, Mucheleka warned that posterity would judge the nation harshly with the burden it was placing on future generations through the huge external debt.

"The mining sector appears to be the only option to avoid over borrowing because what is coming out from this sector is not enough," he said. "It is very sad that the PF government campaigned on the premise to come and restore the windfall tax, but that has not happened."

Mucheleka said it was sad that only eight per cent of revenue coming out of the mines was what remained in Zambia.

"People are pretending as if they are irritated by what is happening. You all know where the tax avoidance is coming from; you all know the under-pricing that is taking place in the mining sector and you know what you are supposed to do, but you are not doing it," he said.

"This is why the perception out there is that there are some people who seem to be benefitting from what is going on in the mines and that is unacceptable."

He said the UNIP government took 27 years to leave the external debt at U$7 billion when it left power while the MMD left it at U$500 million after the debt write-off.

"When PF came into power, external debt was U$1 billion or so, but in the third year of this government, we are talking of getting back to U$7 billion within three years. It's not a prudent way of managing the economy," he said.

Namugala when opposing the move to increase excise duty on airtime from five to ten per cent said the government should not overburden the poor by such a move, but should introduce windfall tax.

"It is bad economics to tax the poor, because we all know that the poor people are in the majority. So, when you tax them, you are reducing their capacity to spend on their goods and services, what the minister is saying is that when a person in Mafinga spends K10 on airtime, they are going to speak for a shorter period of time than they did before," he said.

Namugala said increasing excise duty on airtime would make it more expensive for the people who need to communicate using cell-phones.

"We have time and again asked the government to introduce windfall tax, if you need to raise revenue, tax those that are creating massive wealth in this country," she said.

"Tax the mines because we all know that when they create wealth, this wealth goes out of this country, we all know that when a poor person creates wealth in Zambia, they will use it to increase productive capacity of our economy."

Namugala said it was high time Chikwanda faced the truth about the need to tax the mining companies to enable Zambia raise her revenue base.

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