Monday, March 24, 2014

Windfall tax on mines inevitable - Fr Mwewa
By Misheck Wangwe in Kitwe
Sat 07 Dec. 2013, 14:00 CAT

IT will be an act of betrayal to many Zambians if the PF government refuses to reintroduce windfall tax on the mines, says Fr Augustine Mwewa.

In an interview yesterday, Fr Mwewa, a former treasurer general of the Catholic Diocese of Ndola, said the government was not being sincere with Zambians over windfall tax.

He said the PF government's failure to reintroduce windfall tax was a serious contradiction to its ideals of creating national wealth for the eradication of poverty.

"The Minister of Mines Christopher Yaluma has said the government had no immediate intentions to revise the mining taxation regime to bring back windfall taxes. This is disappointing because the PF campaigned on the premise of a pro-poor approach to government," Fr Mwewa said.

"It's not possible to end poverty without creating national wealth, without using the country's richly endowed national resource which is copper to remove the majority poor people in our nation from the shackles of poverty. We need to maximise revenue from the mines and reduce on outside borrowing because we have mineral resources."

He said it would be difficult for the PF government to derive tangible revenues from the mining sector without reintroducing windfall tax, which must be applied on excess profits from the mines.

Fr Mwewa said the reintroduction of windfall tax was inevitable in Zambia because appropriate mine taxes should be the major source of national financial sustainability, adding that genuine investors in the mines would not run away but stay and support the government's move.
He said issues such as finance minister Alexander Chikwanda going to parliament to seek powers to increase Zambia's debt ceiling from K20 billion to K35 billion could have been avoided if appropriate taxes were effected on the mines.

Fr Mwewa said the government must begin to demonstrate fiscal discipline to avoid external borrowing which was detrimental to the country's future economy.

"The government is expected to be sensitive to public opinion over this matter because they still have confidence that we have a listening government, a government that comforted us and made us believe that it will spearhead the creation of wealth through appropriate taxes such as the reintroduction of the windfall tax," said Fr Mwewa.

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

For Copper, the windfall tax was pegged at 25 per cent at a price of US $ 2.50 per pound but below US $ 3.0 per pound, 50 per cent for the next 50 cents increase in price and 75 per cent above US $ 3.50 per pound.
But Rupiah Banda's government removed the windfall tax claiming that it was 'hurting' mining investment.

And following the election of the PF into government, pressure from the civil society mounted for the reintroduction of the windfall tax.
However, finance minister Alexander Chikwanda said those calling for the reintroduction of the windfall tax were 'lunatics'.

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