COMMENT - More arrogance from the mines. Not contented with the abolition of the windfall tax, they want the abolition of the variable profit tax as well. According to mr. Bantubonse, the mining sector does not need to support us, we need to support the mining sector. How long will the Zambian people be taken for a ride?
Parliamentary Committee takes Bantubonse to task over windfall tax
By Florence Bupe
Mon 18 Oct. 2010, 18:50 CAT
THE expanded Parliamentary Committee on Estimates yesterday took to task Chamber of Mines of Zambia general manager Frederick Bantubonse for commending government on its continued refusal to re-introduce windfall tax for mining companies.
The Chamber of Mines appeared before the committee to make its submissions on the 2011 National Budget that was recently unveiled by government. In his submission, Bantubonse said it was good that government had not succumbed to pressure to have the windfall tax re-introduced for mining firms.
“The importance of mining to the Zambia economy cannot be overemphasised. The mining sector, therefore, needs to be supported by everyone to enable it grow,” Bantubonse said. “It is in this vein that we salute and support the stand taken by the finance minister not to succumb to public pressure to reintroduce the windfall tax.”
Bantubonse further submitted that government should remove the variable profits tax, much to the annoyance of the members of the committee.
He argued that removing the variable profits tax would boost investor confidence and allow the mining sector to grow and in the long term contribute more meaningfully to the national economic growth.
Bantubonse claimed that Zambia’s calculation of the windfall tax in the sense it was proposed for implementation was too high and could have completely killed the mining industry.
“With the windfall tax in place, experts had worked out that the effective tax rate was over 80 per cent. This is clearly unworkable and could have killed the investments into mining projects. We further agree with the finance minister that no mining country in the world has the windfall tax in the form that it was formulated in Zambia,” he said.
But committee chairperson Highvie Hamududu warned Bantubonse against taking the emotions of Zambians for granted.
“The statement that you are happy that government has withstood public pressure on the windfall tax is very serious and it could have serious implications.
Zambians, who are the public in this case, are the owners of the land and therefore, the minerals, and you are happy that the concerns of the owners are not being taken into account?” Hamududu questioned.
Luena member of parliament Charles Milupi also questioned the premise on which Bantubonse was defending the foreign mines on the payment of tax. He also differed with Bantubonse on his argument that mines were actually in a way paying windfall tax through variable profits tax.
Milupi cautioned Bantubonse against misleading the public by suggesting that windfall tax was equivalent to variable profits tax.
There have been consistent calls for government to reintroduce windfall tax as a sure way of the country benefiting more meaningfully from the mining industry but government has remained adamant.
Labels: CHARLES MILUPI, FREDERICK BANTUBONSE, HIGHVIE HAMUDUDU, PARLIAMENTARY ESTIMATES COMMITTEE
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COMMENT - I think a couple of hundred million dollars in taxes have gone missing.
‘Only Kansanshi Mine is able to pay normal taxes’
By Chiwoyu Sinyangwe
Tue 27 Oct. 2009, 04:01 CAT
KANSANSHI Copper Mine is the only mine in the country in a position to pay normal taxes, finance minister Dr Situmbeko Musokotwane said yesterday as parliamentarians reiterated calls for the restoration of the abolished windfall taxes regime.
And Zambia Revenue Authority (ZRA) commissioner general Chriticles Mwansa said the expected revenue earnings from the variable profit tax in the mining sector had not yet been determined.
Appearing before the expanded parliamentary committee on estimates, Dr Musokotwane said all mining companies with the exception of Kansanshi Copper Mine were
not in a position to pay normal taxes as they were still paying back the startup loans or were expanding their projects.
Dr Musokotwane said the government would be in a position to collect money from the mining companies once they started making profits after repayment loans for their invested capital.
He said the current regime governing the mining sector favoured increasing attraction of investments into the country’s main economic stay than to “kill the cow before it starts producing milk.”
“If we force them mining companies to pay by getting taxes when they are not in the position to do so, the incentive for them to expand their operations will be killed,” Dr Musokotwane told parliamentarians.
“The reason for the revenue not coming from the mining companies is that we recognise that we have to allow them to recover the losses because they spent money to bring in equipment, things like hiring staff which all went up with the recent high international metal prices…so, we allow the companies to write-off losses against profits. I believe that at the moment, only First Quantum Minerals who operates Kansanshi has exhausted the right of that period to pay back the loans and are now in a position to pay normal taxes.”
And Mwansa said ZRA was currently working on modalities of estimating the revenue earnings from the mining sector including the variable profit tax.
Mwansa said the revenue could not be pronounced in the just-released national budget for 2010 as the country’s revenue authority had not yet finished auditing the mining companies. He said ZRA was expected to complete the auditing by next year.
“…But you need to have trust in the institutions entrusted with this responsibility because we have the qualified staff whose ability has been enhanced over the years,” said Mwansa, adding that ZRA’s ability to track revenue from the mining sector went beyond the Zambia’s frontiers as provided for in the revenue’s Act.
Earlier, the parliamentarians complained that mining companies had continued to reap at the expense of the country following the abolishment of the popular windfall tax.
Luapula member of parliament Peter Machungwa said while it was acceptable for new mining projects like Lumwana Copper Mine to be given tax breaks, most investors like Vedanta Resources needed to pay normal taxes as they took over already developed mines.
“Even talking about waiting before starting to milk the cow…you find the cow will keep getting fatter while the country disintegrates,” said Machungwa.
At the height of the copper boom, the Zambian government introduced a new mining fiscal regime which aimed to increase revenue earnings from the country’s lifeblood with last year’s projection estimated at US $415 million.
Labels: CHRITICLES MWANSA, KANSANSHI MINING PLC, PARLIAMENTARY ESTIMATES COMMITTEE, SITUMBEKO MUSOKOTWANE, TAXATION
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'Lupando incurred unconstitutional expenditure amounting to K10bn'
By Mwala Kalaluka
Wednesday August 13, 2008 [04:00]
THE Parliamentary Committee on Estimates on Monday expressed shock at revelations that former vice-president Lupando Mwape incurred unconstitutional expenditure amounting to K10 billion from his ‘extraordinary’ travels during campaigns for the 2006 general elections. And State House incurred unconstitutional expenditure amounting to K553 million in 2006 as a result of payments towards unforeseeable events that required attention.
Explaining the Office of the Vice-President’s (OVP) supplementary expenditure for the year ended December 31, 2006, OVP permanent secretary for administration Austin Sichinga said the K10,563, 525,456.00 was realised because President Levy Mwanawasa had delegated part of his job to Mwape.
“You will recall that this was a year of an election. The President dissolved the government, the parliament and Cabinet as well, except for the Office of the Vice-President and the President’s Office,” Sichinga said.
“This created an extraordinary travel movements for his Honour.”
Sichinga explained that the election also culminated into the appointment of a new vice-president.
“I had, therefore, to prepare the office and Government House for the new Vice-President. These extraordinary activities exceeded our budget projection and, therefore, I had to ask for supplementary budget,” Sichinga justified.
He said the Parliamentary Business Department of the OVP incurred unconstitutional expenditure of K28,319,028.00 in the year under review because of an increase in the number of Action Taken reports that needed to be submitted. Sichinga said the number of parliamentary committees had increased from nine to 21 and consequently the reports to the committee had become bulky.
He further said that the drought experienced in most parts of the country in 2005 and 2006 caused the Disaster Management and Mitigation Unit (DMMU) to overspend by K3 billion.
But Lukulu East ULP member of parliament Batuke Imenda said it was surprising that the vice-president, who was supposed to defend his own constituency, had to incur such a huge amount of supplementary expenditure during an election year.
Bwacha MMD member of parliament Reverend Gladys Nyirongo asked Sichinga to explain what he meant by ‘extraordinary travel movements.’
Rev Nyirongo said during the time the amount was incurred, President Mwanawasa’s health was not okay and he had been advised to tone down on his travels.
“If you look at the expenditure of the President on these elections, it is only K3 billion. But here is the Office of the Vice-President going into K10 billion!” she wondered. “It is completely unbelievable for the Office of the Vice-President to gobble K10 billion just on political campaigns and on disaster management.”
Lusaka Central PF member of parliament Guy Scott said it was shocking that about US $3 million worth of extraordinary expenditure was awarded to one man to go round the country campaigning for his party.
Luampa UPND member of parliament Josephine Limata said the amount was extraordinarily huge more so that former vice-president Mwape was a candidate like any other.
In response, Sichinga said the OVP did not have to ask for funds from the Office of the President in a situation where the Vice-President has been asked to do a delegated job by the President.
Committee chairman Godfrey Beene asked Sichinga to explain to what extent he as controlling officer could put his foot down before any unconstitutional expenditure was authorised.
“If we make a precedent of approving K10 billion, next time we might approve more than this at the expense of taxpayers,” Beene said. “We should not be taking advantage of situations.”
However, Sichinga said whilst his job was to ensure prudent use of public resources, the issue under discussion was a constitutional one. He said the Vice-President’s trips were usually expensive in view of the high number of people involved.
“You can’t go to the President and say Mr. President I can’t pay this because it is political,” Sichinga said.
He promised to break down the K10 billion for the committee after asking it to help controlling officers avoid such situations in future.
And State House principal private secretary Alfred Chipoya told the committee that K28, 567, 500.00 was the supplementary expenditure incurred by State House on the purposes of de-worming and treatment of wild animals at State House following the outbreak of tick-borne disease. He said K50 million was the unconstitutional expenditure incurred on payments for settling-in-allowances for officers who were appointed in the civil service after the restructuring of State House.
Chipoya also said K25 million was incurred as supplementary expenditure following the connection of State House to Zamnet and for line rentals. He disclosed that K450 million was the excess expenditure on transport management.
“The sum of K300 million incurred was a result of a general increase in fuel prices through out the country,” Chipoya said.
“And the sum of K150 million was incurred on insurance premiums for escort vehicles and motor cycles which were procured for State House (special duties) by Ministry of Works and Supply; this was not in our initial budget.”
Meanwhile, permanent secretary for administration at Cabinet Office, Mubita Kalabo, was turned away by the committee after it was realised that the figures in his memorandum and those in the Supplementary Appropriation (2006) Bill, 2008 were not corresponding.
Labels: BATUKE IMENDA, GLADYS NYIRONGO, LUPANDO MWAPE, PARLIAMENTARY ESTIMATES COMMITTEE
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Mines resist new taxes
By Bright Mukwasa
Tuesday February 12, 2008 [03:00]
MINING companies in the country have threatened to use legal means to block the government from implementing the new mining fiscal regime. Appearing before the extended parliamentary committee on estimates yesterday,
the mining companies urged the government to use the instruments within the development agreements to effect the proposed mining tax regime before it is passed into law.
Among the mining companies that appeared before the committee were Mopani Copper Mines Plc (MCM), Lumwana Copper Mines (LCM), Chibuluma Copper Mines, Kansanshi Copper Mines, Konkola Copper Mines (KCM) and Non-Ferrous Corporation Chambishi Mines.
Submitting before the committee, First Quantum Minerals country manager Chisanga Puta-Chekwe said if the fiscal regime was implemented, Kansanshi Copper Mines would be in trouble with its shareholders.
Puta-Chekwe said there were procedures that needed to be followed by both government and the mines before the new tax regimes could be implemented.
He explained that in cases where the agreements were violated, litigation was sought in many instances by the affected party.
He said it was important for the government to adequately inform the international community about the new mining fiscal regime or they risked making the country an unattractive investment destination for future investments in the mining sector.
And Chamber of Mines president Passmore Hamukoma said despite government having promised the mining companies to renegotiate the new tax regime, government did not engage them.
Hamukoma, however, said the mining companies were open to renegotiation before the mining fiscal regime could be implemented.
“We have not been called to discuss the fiscal issues affecting the mines, therefore we have not had a chance of explaining the effects of not being in consultation with the other arm which has put the new tax regime,” Hamukoma said.
Hamukoma, who is also MCM chief services officer, said the development agreements were legally binding and the sector had no problem in abiding by them.
Chamber of Mines general manager Frederick Bantubonse said earlier on, President Mwanawasa wrote to the mines indicating voluntary negotiations of the new tax regime.
“The President wrote to us on the development agreements of which we have no problem with it being a legally binding document, he requested for voluntary negotiations, but we were surprised that the President went ahead to announce the new tax regime without our say,” Bantubonse said.
Chibuluma Mines general manager Ed Mounsey said the new tax regime would harm investments made by Metorex Mines into the development of Chibuluma South copper mine if the regime is implemented.
“The investment made by Metorex will not be recouped, they will be no dividends or profit externalisation and so these are some of the effects on the company if the new tax regime is passed into law,” Mounsey said.
“Therefore, government should not pass the Bill in its current state, instead they should carry out an independent review of proposed tax changes for the viability of the mines, and we urge you to encourage government to negotiate with mining companies.”
KCM operations director CP Baid said the mine was looking forward to meaningful dialogue before the tax regime was implemented.
Mopani chief financial officer Gavin Heale said if the new tax regime was implemented, it would lead to the mine suspending some of its expansion projects currently taking place.
“We acknowledge the development agreements but we are concerned with the process with this situation at hand,” Heale said. “It could see some projects being cancelled because the current situation seems unsustainable, of course this would also make the life of mines questionable.”
NFC Chambishi mines-corporate affairs manager Nelson Jilowa said the budget speech on the mining tax regime seemed to override the development agreements the company signed with the government at the beginning of its operations.
Recently, finance minister Ng’andu Magande declared that there would be no room for the mines to negotiate with the government the new mining fiscal regime.
Labels: KANSANSHI MINING PLC, KCM, LUMWANA MINING COMPANY, MCM, MOPANI, PARLIAMENTARY ESTIMATES COMMITTEE, WINDFALL TAX
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Treasury officials sent packing
By Times Reporter
THE parliamentary estimates committee yesterday sent back the team led by acting Secretary to the Treasury James Mulungushi because they did not present satisfactory explanations on the new mining tax regime. Dr Mulungushi was in the company of Zambia Revenue Authority (ZRA) Commissioner General and other senior members of staff from the Ministry of Finance and National Planning.
Dr Mulungushi and his team were asked to prepare a fresh report that would satisfy the committee chaired by Itezhi Tezhi MP Godfrey Beene, and present it by tomorrow. Mr Beene described the report by Dr Mulungushi as unsatisfactory and ordered him to prepare a fresh one, which should be presented before the committee by tomorrow.
Mr Beene told Dr Mulungushi that the committee members were not satisfied because the report left out key details of the proposed windfall tax on copper mines.
Dr Mulungushi had also said that Government plans to open a special account at the Bank of Zambia (BoZ) to keep the excess revenue from the mines.
Dr Mulungushi further said that Government has set up a committee to plan on how the projected revenue of US$415 million would be raised under the new tax regime.
This prompted the committee to question why the projected revenue of US$415 million was not included in the national budget. The committee argued that it is only parliament that has the authority to approve any expenditure and not the executive.
“As a committee, we are looking at the legal position on new mining tax and the position on the setting aside of the excess revenue and why is this money not included in the budget. We are disappointed because you have failed to give us the legal position on these important matters,” Mr Beene said.
And appearing before the same committee Zesco managing director Rhodnie Sisala said the demand for electricity increased from 1,447 MW in 2006 to 1,605 MW in 2007 attributing it to the increased activities in mining, agriculture, commerce, tourism and others sectors.
Mr Sisala said that this year, the demand for electricity is expected to rise as more investment is anticipated in various sectors. He however assured the committee that the savings from Pay As You Earn and Value Added Tax (VAT) would be channeled into investment.
“The power deficit is likely to continue till December 2008 when most of the machines are expected to be back in service. This scenario will translate into load shedding on most retail customers.
“ This situation is expected to improve as upgrade generators are brought back into service from June 2008,” Mr Sisala said.
Labels: GODFREY BEENE, PARLIAMENTARY ESTIMATES COMMITTEE, WINDFALL TAX, ZRA
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