COMMENT - A good move towards actually taxing the foreign corporations that are dragging Zambia's copper out of the ground without paying for it.
(LUSAKA TIMES) ActionAid Zambia welcomes Government’s move to cancel the Double Tax Agreement with Mauritius.
June 26, 2020
Economy ActionAid Zambia welcomes Government’s move to cancel the Double Tax Agreement with...
ActionAid Zambia has welcomed the government’s move to cancel the Double Tax Agreement with Mauritius.
Action Aid Zambia Country Director Nalucha Ziba said her Organisation has for a long time been campaigning for cancellation and re-negotiation of problematic DTAs Zambia has with different countries.
She said a Double Tax Agreement or tax treaty is a legally binding agreement between states, which governs the taxation of cross- border activities; namely investments by a resident of one state in the other state, and vice versa.
Mrs Ziba said Zambia has signed DTAs with different countries such as Germany, Ireland, Norway, Sweden, Mauritius (now cancelled) to mention but a few which spell out how companies investing in a country that Zambia has signed a DTA with their country of origin should be taxed.
She has explained that if for instance, if Zambia has a tax treaty with Mauritius, therefore a Multinational Company originating from Mauritius and operating in Zambia will utilize the tax provisions in the DTA between Zambia and Mauritius.
Mrs Ziba however said that in the recent times, Tax Treaties have not only been found to be unbalanced but also a source of tax evasion by most multinational companies, denying the host countries the much-needed revenue.
“For example, some DTAs provides for as low as 0-7 percent tax rate while others have no or weaker anti-abuse provisions”, she added adding that for some time now ActionAid has been calling for revision and/or cancellation of regressive DTAs like the now cancelled Zambia and Mauritius DTA.
She said the DTA between Zambia and Mauritius provided for 0 Percent Withholding Tax on technical fees paid for technical services.
Mrs Ziba said with this provision a Mauritius based Multinational Company, would take advantage of such provisions and not pay any WHT on technical services which is currently capped at 15 percent.
“For example, if this company engaged a sister company from Mauritius to provide technical services at a cost of USD100 million. This company when making this payment (USD100 million) to a sister company will not deduct any WHT. This implies that the entire USD100 million is untaxed. On the Contrarily, if the DTA provided for 15 Percent WHT on technical fees then USD 15 million would be deducted as Withholding Tax and remitted to Zambia Revenue Authority (ZRA)”, Mrs Ziba said.
She said Action Aid conducted a study titled “Sweet Nothings” which showed how Associated British Foods operating in Zambia as Zambia Sugar Company took advantage of the international tax agreement between Zambia and Ireland to avoid large tax payments.
Mrs Ziba said Zambia Sugar Company paid over US$47.6 million equivalent to about K209 billion, for management services and purchases to a fellow subsidiary called “Illovo Sugar Ireland” between 2007 to 2012.
She however said that the international tax agreement between Zambia and Ireland (before negotiation) exempted payment of Withholding Tax (WHT) for management
or consultancy services.
She said by channelling this money (USD 47.6million) through their Irish subsidiary, Zambia Sugar avoided paying an equivalent of US$7.4 million between 2007 to 2012.
“It is against this background that we commend the government for the position taken and we wish to encourage government to take a similar position over other unbalanced DTAs”, she added.
She has urged the government to ensure that an impact assessment/cost benefit analysis is done before they are signed and every five years thereafter.
Mrs Ziba said they should not follow the OECD model treaty but develop their own model adding that the government should negotiate for favorable and/or fair DTA’s Withholding Tax rates (10%-15%) which will not only promote foreign direct investment but also ensure that government collects adequate tax revenue.
Shd said all treaties should be negotiated transparently, and draft versions made available to the public prior to signature.
[Read 564 times, 564 reads today]
Related Posts:
Labels: ACTION AID, ACTION AID ZAMBIA, ACTIONAID, NALUCHE ZIBA, TAX EVASION, TAXATION, TRANSFER PRICING
Read more...
COMMENT - This is awesome. What happened?
(LUSAKA TIMES) ZCC IH sues FQM claiming $1.4 billion
November 14, 2016
ZCCM Investments Holdings has started the process of claiming up to $1.4 billion from First Quantum Minerals Ltd accusing the firm of engaging in fraud.
The claim includes
$228 million in interest on
$2.3 billion of loans that ZCCM-IH said
First Quantum wrongly borrowed from the Kansanshi copper mine, as well as
20 percent of the principal amount, or $570 million, according to an internal company presentation, dated Nov. 4, obtained by Bloomberg.
The company is also seeking $260 million as part of a tax liability the Zambia Revenue Authority said Kansanshi owed it, as well as
the cost of the mine borrowing money commercially that ZCCM-IH said could have been avoided.
ZCCM-IH said in papers filed in the Lusaka High Court on Oct. 28 that First Quantum used the money as cheap financing for its other operations.
ZCCM-IH also last month filed a notice of arbitration against Kansanshi in London over the same matter.
No figure was mentioned in the court filings.
ZCCM-IH owns 20 percent of Kansanshi.
But in a statement released Monday evening, FQM President Clive Newall said having carefully studied the claims made in both the Notice of Arbitration and Statement of Claim, First Quantum is firmly of the view that the claims are utterly without merit, or indeed any foundation in facts.
“It is notable that the Kansanshi Mining Plc deposits were fully repaid to KMP and were then used to fund a major investment program in Zambia, including the successful construction and commissioning of the Kansanshi smelter and expansion of the processing plant and mining operations.
“On October 28, 2016, KMP also received a Statement of Claim filed in the High Court for Zambia naming additional defendants, including First Quantum, its subsidiary FQM Finance Ltd., and a number of directors and an executive of the named corporate defendants. This dispute arises out of the rate of interest paid on deposits made by KMP with the Company’s financing entity, FQM Finance Ltd. The funds on deposits were retained for planned investment by KMP in Zambia.”
He said, “FQM Finance paid interest on the deposits to KMP based on an assessment of an arms-length fair market rate, which is supported by independent third party analysis. ZCCM disputes that interest rate paid to KMP on the deposits was sufficient. Unfortunately, ZCCM has taken the extra-ordinary additional step of commencing a further action in the High Court for Zambia, making allegations repeated from the Notice of Claim against certain First Quantum directors and an executive that are inflammatory, vexatious and untrue.”
“In fact, KMP is now indebted to FQM Finance for the funding of further investment in Zambia. The Company is currently engaged in constructive discussions with representatives of the Zambian Government, which holds a 92% direct and indirect majority shareholding in ZCCM, with a view to achieving an amicable resolution. We do not believe it is appropriate to comment further on the arbitration or court proceedings while they run their proper course, but we will provide further information as and when required.”
Meanwhile, Philippe Bibard, a spokesman for a minority shareholder group based in France said FQM is disregarding the rights of minority owners in ZCCM-IH in dealing directly with government.
*With Additional Reporting by Bloomberg
Labels: KANSANSHI MINING PLC, KCM, TAX EVASION, TAXATION, ZCCM-IH
Read more...
COMMENT - Of course it is the absence of the profits from the Windfall Tax, combined with debt from the Eurobonds, that is costing the nation. The corruption starts at the top, right from the IMF/World Bank and their conditionalities like Privatisation down. No governments with the backbone to stand up against them, or the imagination to get together with SADC and the AU and make common cause to sidestep this system.
(LUSAKATIMES) Zambia’s Inconsistent mining taxation policy is costing us
September 16, 2015
File:NCHANGA Mine rescure Team B Captain Jonathan Kolala inspects air underground during the Zambia
Mine Rescure Association competetion at Namundwe Mine
The mining industry is a sore topic for many Zambians; a source of pride and pain depending on where you seat on the fence. Copper is the nation’s main export and the mines are the largest formal employer after the civil service. Those employed in the mining sector are among the most well paid workers in the country. Mining activities have contributed to the growth of mining towns on the Copperbelt, Solwezi being the most recent development.
However, Zambia is still struggling to capture tangible benefits from this mineral wealth endowment for the wider population. Despite being the second largest copper producer in Africa, copper is still exported in its raw form, and the general feeling among the population is that most of the profits are expropriated. In september 2014, Zambia experienced a lot of turmoil in the mining sector, with both Glencore and Barrick Gold threatening to stop operations if differences between the companies and the government were not resolved by January 2015.The major cause of this standoff was a lack of transparency on revenues and profits from the mining companies and a lack of consistent and effective mining taxation policy from the government. This standoff is back, and taxation policy is still a key issue of contention.
Every change of government has seen an adjustment for better or worse, with the claim of serving the countries best interests.
To try and capture benefits for the local economy from copper, the Zambian government has had many changes the mining taxation policy. Every change of government has seen an adjustment for better or worse, with the claim of serving the countries best interests.
Windfall Tax
One of the best changes enacted to the tax regime was during Levy Mwanawasa’s government, which saw mineral royalties increase from 0.6% to 3%, corporate tax from 25% to 30% and a 5 cent windfall tax per pound on any copper sold above a designated market price. However, the windfall tax was over turned by Rupiah Banda’s government due to pressure from mining companies to scrape the new reforms. They claimed that the tax was creating an ‘unattractive’ business environment for the country, despite favourable copper prices on the international market at the time. The mining companies succeeded by using contractual obligations and the financial crisis. On the other hand, the government conceded to this pressure arguing that Zambia was the only country in the region that had a windfall tax at the time. The government did not see this as an opportunity to be a leader in effecting a positive trend for regional mining taxation.
Mineral Royalties
In 2012, Michael Sata’s government again made changes to the tax system with mineral royalties increased from 3% to 6%. However, the windfall tax was not reintroduced. While the Zambia Institute for Policy Analysis and Research (ZIPAR) admits that tax revenues in the country have increased considerably since Mwanawasa’s government, they have made it clear that it is hard to pin this growth on tax regime changes as copper prices and production have also increased consistently during the same period. Further, the Zambia Revenue Authorities (ZRA) has also improved its tax monitoring and administration capacity.
VAT
In September 2014, the impasse between mining companies and the government involved two main issues, both closely related to taxation. Firstly, the mining companies were claiming a $600m refund on VAT from the government, and secondly, the government had more than tripled the mineral royalty tax beginning January 2015 from 6% to 20%, a move that the companies found highly unacceptable. According to VAT Rule 18, companies can claim VAT on inputs for exported goods produced in the country. However, companies find it very hard to claim these tax refunds due to the administrative requirements of the act. This led to the suspension of operations by Glencore at the beginning October 2014 based on unclaimed VAT refunds. Currently, Mopani is threatening to lay off 4 000 workers and is citing non VAT refunds as one of the key reasons for this.
ZRA requires that companies produce a number of documents in order to claim VAT refunds; a shipment certificate provided by the ZRA, a certificate provided by the customs authority in the importing country, invoices for the goods exported, proof of payment into the exporter’s bank account in Zambia and such other documentary evidence “as the authorized officer may reasonably require”. While companies complain that the administrative requirements are too much, this is documentation that is readily available to them as they carry out their transactions. Therefore, the lack of transparency among mining companies has also contributed to delayed payments of VAT refunds from government.
Zambians are not very clear about how much revenues we should be earning from the mining sector Currently Zambians are not very clear about how much revenues we should be earning from the mining sector. These documents required when claiming VAT refunds can provide this information, and help combat the high suspicions of tax evasion in the mining sector.
Mining companies must not be allowed to dictate policy terms for the country. On the other hand, government needs to develop a consistent, effective and sustainable taxation policy. While government cannot solely be blamed for the electricity deficit, the depreciating kwacha and the fall in commodity prices, they take full blame when it comes to inconsistencies in taxation policy. The lack of a long-term outlook when setting mining taxation negatively impacts on investor confidence in the sector, and reduces the value of the countries copper.
With regards VAT refunds, government needs to keep strict documentation requirements and not give the mining companies tax breaks that are too generous. On mineral royalties, government needs to be realistic about how much distortion they impose on production incentives. The highest mineral royalty tax imposed globally on copper mining is 15%. Of course Zambia can set its own tax rate, but there is a need to assess the performance of mining companies in the country to develop a mining policy that actually works and will be sustainable over the long term.
Labels: EUROBOND, IMF, MINING, TAXATION, WINDFALL TAX
Read more...
JCTR launches 'demand a receipt' campaign
By Kabanda Chulu
Thu 16 Jan. 2014, 14:00 CAT
PEOPLE should demand a receipt for every purchase to enable the government have a higher chance of collecting revenue, says the Jesuits Centre for Theological Reflection.
Launching the "Demand a receipt" campaign, JCTR stated that it was everyone's responsibility to help the government maximise revenue collection.
"The link between tax and development is fundamental. A country that should sustainably provide services to its citizens must be able to mobilise domestic resources. But the reality is that many governments, including the Zambian government, struggle to collect sufficient tax revenues to be able to deliver the desired level of development," JCTR stated in a statement issued by the Economic Equity and Development Programme.
"As JCTR, we believe that if every individual took it upon himself/herself to demand a receipt after every purchase, the chances of collecting tax revenue will be enhanced."
It stated that it was more difficult for a trader to evade tax on a receipted transaction than on an un-receipted one.
"On the other hand, it is easier for the revenue authority to keep track of receipted transactions and collect tax than on un-receipted transactions. Therefore, all people should demand a receipt on every purchase they make as this is one sure way for government to trace all transactions, reduce tax evasion and increase tax revenue collection," stated JCTR.
"This will also address the current disproportionate tax burden which is largely borne by people in the formal sector and ultimately, increase equity in resource mobilisation."
Despite the income tax regulations requiring businesses to issue receipts and keep a cash machine, many traders do not follow the law and enforcement was lacking.
Labels: JCTR, TAXATION
Read more...
Majority mine workers not paying tax - MUZ
By Misheck Wangwe in Chambishi
Mon 13 Jan. 2014, 14:00 CAT
MINEWORKERS Union of Zambia (MUZ) says majority of the lowest paid miners get salaries below K3,000 making it difficult for the government to collect enough revenue through Pay As You Earn (PAYE) from them.
In an interview yesterday, MUZ general secretary, Joseph Chewe, said the union expects investors in the mining sector to seriously readjust the remuneration of miners upwards so that they could begin to look after their families well and also contribute towards the much-needed tax to the government.
Chewe said MUZ and its collaborating partners would this year work extra hard to ensure that every collective agreement signed would have a positive impact on the living standards of miners and their families.
"Our records after research show that 90 per cent of the basic salaries for the lowest bracket of the mine employees are falling below the threshold of K3,000 and as you know the government has raised the threshold of Pay As You Earn to K3,000 in this year's budget. As a union we are very worried because this means that most of our members will not be paying the tax, and government will not be benefiting as expected from unionised miners," Chewe said.
He said the revelations came as a serious matter because employees in the mining sector needed to get enough remuneration so that they could also pay tax to the government.
Chewe said MUZ was mindful that the mining sector was the driving force of the Zambian economy and the industry was also a major employer on permanent basis, hence the need for mining companies to be reminded that majority of their employees were actually not paying tax.
"We need to negotiate for salaries higher than the threshold of K3,000. This should be the guiding principle for all of us who are stakeholders in the mines, that we need to work together and ensure that in the next negotiations, we need to produce positive results," Chewe said.
Chewe said the government must also show direction and ensure that investors in the mines begin to pay considerable salaries this year, so that appropriated taxes could be remitted to the government through PAYE.
Labels: MINING, MUZ, PAYE, TAX EVASION, TAXATION
Read more...
(STICKY) Chikwanda wants govt to pay mines $600m in VAT refunds
Edited by Chiwoyu Sinyangwe
COMMENT - So the state borrows $1 billion through a Eurobond, and they don't know what to do with it? And they have the gall to say we need another Eurobond, because 'we need something for agriculture'? If they ran out of ideas, I have few ideas that not only spend the money well, but would create massive returns to the state - a concept that seems to elude the present government. And no, I don't trust the UPND, let alone the MMD who had 20 years to develop the economy. Giving borrowed money to the mines! Outrageous. - MrK
FINANCE minister Alexander Chikwanda wants the government to pay mining companies the disputed US$600 million (about K3.6 billion) in value-added tax repayments over a staggered period.
ZRA has withheld over US$600 million in value-added tax repayments to mining companies that have failed to provide importer documentation required to qualify them for VAT reclaim on the zero-rated copper exports.
“The minister [Chikwanda] says our current fiscal space is severely constrained for us to refund these mining companies of their VAT but that we can only clear the huge backlog by negotiating staggered repayments with the mining companies after we have instituted a more prompt VAT refunds regime,” according to the sources within Ministry of Finance.
The sources said the government currently did not have sufficient funds to offset the VAT refunds being claimed by mining companies.
“The minister says the only way for the government to clear this backlog promptly is to allow Treasury access some funds from the recently-acquired US$1 billion which currently was ‘sitting’ at the Bank of Zambia. Of that US$1billion Eurobond, only US$300 million has been disbursed so far and remaining the US$700 million is still with the Central Bank.”
The sources also said that Chikwanda contended that VAT General Administration Rule Number 18, which required ZRA to obtain information from importers outside Zambia’s jurisdiction had proved impractical and was blamed for delayed processing of VAT refunds for the mines.
VAT Rule 18 was aimed at assisting the government collect more accurate trade statistics.
In line with VAT general administration Rule Number 18, for any exporter to qualify for VAT zero rating of its exported goods, they must satisfy requirement which included copies of export documents for the goods bearing a certificate of shipment provided by ZRA, copies of import documents for the goods bearing a certificate of importation into the country of destination provided by the customs authority of that country.
Rule Number 18 also required exporters to provide proof of payments by the customer for the goods, tax invoices for the goods exported, documentary evidence, proving that payment for the goods has been made by the customer into the exporter’s bank account in Zambia [as introduced in January 2013], and such other documentary evidence that might reasonably be required by the authority.
But according to sources, Chikwanda had proposed that ZRA should amend Rule Number 18 to limit it to regulation and verification of exports and bank certification of receipt export proceed in order to clear the uncertainty and restore the confidence in the economy that was undermined by adjustment to Rule 18.
Last year, the government streamlined administration of the VAT refunds for the mining sector which included introducing rules requiring provision of documents from importers of copper to authenticate the final destination of copper being exported out of Zambia and the export revenue needed to be paid directly to a Zambian bank although some mining companies were paid through foreign accounts.
Konkola Copper Mines (KCM) has taken ZRA to the Lusaka High Court over a K3.2 billion tax bill relating to a retrospective 16 per cent VAT charge on exports from January 2011 to March 2013.
Some companies, including those in the mining sector, found to be complying with Rule Number 18 include KCM, Mopani Copper Mines and Zambezi Portland.
“The problem is that some mining companies and even other exporting companies allude that ‘they sell their products mostly to international traders who take ownership of the product either at the mine/factory gate or as soon as they are put in a ship at Dar es Salaam, Dubai or Durban,” the sources within ZRA said. “For purposes of VAT, a sale at the mine/factory gate is a local sale and should therefore be standard rated sale at 16 per cent of the sale and not zero-rated.”
Labels: ALEXANDER CHIKWANDA, CORRUPTION, EURBONDS, MINING, TAX EVASION, TAXATION, ZRA
Read more...
SI 103 is a big headache - ZECB
By Masuzyo Chakwe
Wed 01 Jan. 2014, 14:00 CAT
THE Catholic Church says government's lifting of tax exemptions for public benefit organisations and other non-governmental organisations through Statutory Instrument 103, will have enormous and long-term repercussions on the church's ability to help poor people.
In a New Year's message yesterday, Zambia Episcopal Conference spokesperson Fr Paul Samasumo stated that the Church would begin this year with a big headache caused to it by way of the Statutory Instrument No. 103 of 2013.
He stated it would become increasingly difficult for the Church to purchase field utility vehicles such as vans for pastoral and social activities, equipment for churches, schools and hospitals as well as spare parts.
Fr Samasumo stated that the Catholic Church in Zambia simply does not have the ability to pay the high customs duty that would now be required.
"This, in turn, will seriously and negatively impact on the Church's ability to help the poor, who are the beneficiaries of most of our social programmes. The impact will be felt more in the health and education sectors. However, our pastoral and Church programmes will similarly be affected," he said.
Fr Samasumo said if one considered that the Catholic Church provides close to 70 per cent of all rural health care in Zambia or the fact that the Church runs the largest number of grant-aided schools in the country, the Statutory Instrument had serious and far-reaching implications.
"Just to illustrate: We have three teacher training colleges; 38 grant-aided secondary/high schools; nine special schools for children with various disabilities; more than 100 nursery and community schools; numerous primary and secondary schools that are privately owned and fully run by our missionary congregations. These figures do not take into consideration nursing schools, many vocational training centres and schools such as carpentry, secretarial, home craft centres, hotel and catering schools as well as parish adult literacy clubs. All these in various ways will be affected by this Statutory Instrument," he said.
Fr Samasumo said most of the help for church programmes in Zambia comes from Europe and this aid had been dwindling over the years.
He said the few donors still remaining would not take kindly to the use of donated funds for customs duty or for donated equipment meant for the poor to be taxed here in Zambia.
"They will simply reduce or stop sending aid. In the end, it will be the poor to be affected. Our experience is that once donors move aid else where, they do not return. The government facility of tax exemptions has always been for non-luxury items and non-luxury vehicles. If government knows of anyone abusing this facility, the best thing would have been for the law enforcement agencies to prosecute those found wanting instead of punishing everybody," he said.
He said governments encourage and give incentives to anyone doing good charitable work because they realise that governments were not able to be everywhere.
Fr Samasumo said the Church was a partner of government and targeting the very institutions supplementing government work was "indeed very disappointing".
"We hope there can still be dialogue over this Statutory Instrument. As our Bishops come for their January meetings, this is something that they will certainly be keen to engage with government," he said.
And Fr Samasumo said Pope Francis has written a New Year message in which he has called the world to embrace fraternity as the foundation of peace.
"Fraternity is about treating each other as brothers and sisters because that is what we really are," he said.
"From the very start, Pope Francis has himself personified the very meaning of fraternity by his openness and concern for the poor. It is therefore, not surprising that in his first New Year's message, Pope Francis elaborates on the poor and on peace under the inclusive and meaningful heading of fraternity."
He said the Catholic Church in Zambia would this year continue to embrace the poor wherever they were.
Fr Samasumo said the Church would do this through the social and development wing known as Caritas Zambia.
"There is a branch of Caritas in every parish and diocese. Although normally one wants to be positive and hopeful at the beginning of the year, for us the year is beginning with a rather big headache (Statutory Instrument)," said Fr Samasumo.
Labels: SI103, TAXATION
Read more...
Govt won't allow sale of tax exempt goods - Yamba
By By Kabanda Chulu
Wed 01 Jan. 2014, 14:00 CAT
THE government will not allow tax exempted imported goods, including motor vehicles, to be sold without following guidelines and approval from the Zambia Revenue Authority, says Secretary to the Treasury Fredson Yamba.
Following the coming into force of Statutory Instrument No 103 of 2013, all motor vehicles and spare parts imported by non-profit making organisations, including the Church, will no longer qualify for tax exemption.
Among other goods which would no longer qualify for tax exemption under the Public Benefit Organisation Scheme include wines and some other liquor or alcoholic beverages, electrical household goods, tobacco products, goods whose value is equivalent to a travellers allowance remission under Statutory Instrument Number 54 of 2000, Customs and Excise General Regulations, of 2000, and Firearms.
Goods on which Public Benefit Organisations will still enjoy exemptions are sacramental wine when imported by a religious order or church, beds, mattresses, linen and kitchen equipment.
Commenting on the matter, Yamba said the government was concerned that some Public Benefit Organisations had entrenched the practice of changing the terms of importation, purpose of usage and in some cases, selling tax exempt imported goods without the approval of the Commissioner General of the Zambia Revenue Authority.
"Under this piece of legislation, any organisation which violates the provisions under which existing tax exemption incentives have been granted shall face sanctions, including revocation of the approval and will be liable to pay requisite taxes on the goods imported under the scheme at the rate leviable at the time of the initial importation of such goods," said Yamba.
During the presentation of the 2014 National Budget to Parliament on October 11, 2013, Minister of Finance Alexander Chikwanda announced that the government had undertaken a review of tax incentive regimes in order to rationalise tax incentives as part of the tax reform process.
"To this effect, the Customs and Excise (Public Benefit Organisations) (Rebate, Refund or Remission) Regulations, Statutory Instrument No. 7 of 2009 was reviewed, to streamline exemptions provided to Public Benefit Organisations. In addition, the ministry also reviewed the administrative processes in order to provide efficient and timely delivery of services," said Chikwanda.
Labels: FREDSON YAMBA, TAXATION
Read more...
Windfall tax will be disastrous - Xingeng
By Misheck Wangwe in Luanshya
Wed 25 Dec. 2013, 14:00 CAT
IT will be a disaster for the mining sector if the government acts on calls for the reintroduction of windfall tax, says CNMC Luanshya Copper Mines chief executive officer Luo Xingeng.
But Reverend Richard M'bao has argued that reintroduction of windfall tax is inevitable and the PF government must bring to an end the manipulation of mineral resources by putting up a more effective fiscal regime.
Briefing the press in Luanshya after the annual awards ceremony for miners, Luo said windfall tax, if introduced, would scare away foreign investment in the mining sector.
He said mines like Luanshya Copper Mine's Baluba Mine had huge challenges and the company was making efforts by reinvesting in it to make it survive.
Luo said windfall tax would discourage such investment because some mines were currently surviving only through serious capital injections and were yet to record significant production.
"If Baluba Mine was a tree, we can say it almost dried. We are putting fertiliser to save it and we know we are not going to see its fruits anytime soon. So windfall tax will be disastrous if reintroduced. What Zambia needs right now are favourable policies that will encourage more investment, create jobs while helping to create wealth," Luo said.
And speaking earlier during the awards ceremony for miners, Luo said production at Baluba met huge challenges as the trackless equipment was in poor condition, the new long-hole drilling machine was extensively damaged, and defects also existed in production management.
He said all the challenges resulted in the failure to achieve the 2013 production target.
"From January to July, the unit cost of copper in concentrate reached US$7,980 per tonne, which was close to US$8,000 dollar per tonne. However, the London Metal Exchange (LME) copper price was about US$7,100 per tonne on average. From the comparison of the cost of production and the selling price, I wish you can fully understand how difficult it is for management to keep Baluba surviving," Luo said.
He said to reduce the high cost and save Baluba, the company quickly replaced the damaged drilling machine and strengthened the cost control. From August, the cost of production slightly reduced and production returned to normal.
Luo said at CLM's Muliashi Mine, after going through huge hardships, the new mining process and technology had shown great life.
He said the agitation system had surpassed the design capacity, which reduced the negative impact of the low ore grade.
Meanwhile, former chairperson of the Pastors' Forum for Eastern and Southern Africa, Reverend Richard M'bao said the poverty situation in Zambia amid rich mineral resources was a serious contradiction that must be addressed through the introduction of appropriate taxes.
Commenting on calls for the PF government to reintroduce windfall tax, Rev M'bao said it was unacceptable that Zambia had almost 70 per cent of its people living in abject poverty with very little access to basic requirements like clean water and energy.
"We can say that for many years now, the country has been yearning for appropriate taxes, the current fiscal regime for the mining sector is inadequate and Zambians deserve more that what has been offered. Zambians need windfall tax so that when super profits are made by foreign investors in the mines, those companies will not take away everything but share with the government and the people," Rev M'bao said.
"Remember when the late president Mwanawasa introduced windfall tax, benefits of that were seen by ordinary citizens. It became clear that the decision of his successor Rupiah Banda to remove windfall tax was not in the best interest of the nation, hence the need for President Michael Sata's administration to reintroduce windfall tax."
He warned that if Zambians were not careful, the country's natural resources would diminish and investors would run away, with the country having nothing to point at as benefits of having minerals.
Labels: LUO XINGENG, RICHARD M'BAO, TAXATION, WINDFALL TAX
Read more...
Online tax payments will mitigate opportunities for corruption - ZRA
By Kabanda Chulu
Sat 21 Dec. 2013, 14:00 CAT
ZAMBIA Revenue Authority says implementation of online tax payment systems will minimise physical interaction and mitigate opportunities for corruption among stakeholders in the clearance process.
ZRA has started implementing robust web-based systems called AsycudaWorld that allow customs administration and traders to handle transactions through the Internet.
So far, ZRA has launched the facility at KK International Airport, Lusaka Port Office, Chirundu and Kariba and will next week launch the Livingstone site, while the rest of the customs offices will implement the system in the first quarter of 2014.
According to a statement issued by ZRA, the system will enable stakeholders to conduct business with customs services at anytime.
"The AsycudaWorld system enables paperless e-commerce through electronic declaration and submission of supporting documents to customs services such as invoices, parking list, certificates of origin, among other requirements," it stated.
"The system will enable anyone to search applicable tariff rates and regulations for goods of interest. It will also enable taxpayers to track status of the customs clearance process for their goods, including taxes assessed through their emails or sms notices."
It stated that creation of central processing centres (CPC) would enable ZRA to streamline the clearance process and provide the service in an efficient way.
"The CPCs will initially be set up at Lusaka, Kabwe and Ndola and all customs declarations submitted by imports/exporters electronically from different locations at anytime will be processed at the three CPCs which will equally operate for extended hours even after borders have closed," it stated. "The CPCs will also enable ZRA to provide a uniform service to the public, standardisation in the application of the law and procedures regardless of which borders one uses."
It stated that AsycudaWorld was earmarked to evolve into an electronic single window for Zambia by the end of 2014.
"A single window is a trade facilitation service that allows parties involved in trade to lodge standardised information and documents with a single entry point to fulfil all import, export and transit-related regulatory requirements," stated ZRA.
Labels: INTERNET, TAXATION, ZRA
Read more...
Govt should revise double taxation treaties - Chigunta
By Kabanda Chulu
Wed 18 Dec. 2013, 14:00 CAT
THE government should go beyond renegotiating mining development agreements to revise double taxation treaties that are used by some foreign investors to avoid tax payments, advises Dr Francis Chigunta.
Chigunta, a Development Studies lecturer at the University of Zambia and former special advisor to Rupiah Banda, said Zambians needed to maximise gains from the country's natural resources. He said many companies were using the double taxation treaties to evade taxes in Zambia.
"Government should also look at the whole agreements which were negotiated under duress, there was much pressure from the IMF and World Bank and price of copper was very low that we had no option and no one knew that prices will suddenly rise. This is why we ended up accepting whatever was given because we had no choice, we were beggars, but now that we are in a strong position, it is time we renegotiated these agreements but we should go beyond and revise double taxation treaties, for example with Ireland and Switzerland," Dr Chigunta said.
"Under these agreements, citizens of either country choose where to declare their profits, you will find companies like Zambia Sugar preferring to declare profits in Ireland where tax is zero rated. This is why Zambia Sugar has legally not been paying a lot to the Zambian Treasury since they can take advantage of that tax loophole and if you look at copper exports or trade, statistics indicate that copper goes to Switzerland because profits are zero rated but copper actually goes to China. These are the agreements we need to do away with, especially that some were signed before independence. But why are we still keeping them; whose existence is to the detriment of the Zambian economy?"
He also advised on the calls for the implementation of windfall tax, saying the reality on the ground was that the country should not implement the tax.
"Indeed Zambians must maximise gains from the country's natural resources, particularly copper which is a national asset, but at the same time, we have to be very careful in the manner that we handle the issue of windfall tax. My view is that we need to be careful in the sense that we should not kill the goose that lay the golden egg," Dr Chigunta said.
"Right now, the mines are going through a period of difficulty, copper prices have been sluggish... They (the mines) have found themselves in this situation of not making a loss or profit and some of these mines are very old, about 80 years and there are those like deep mining at KCM which are facing high operational costs. Therefore, to survive, they resort to borrowing to meet these costs and even if the prices of copper were to rise suddenly, it will still be not possible to make that kind of payment because they have borrowed massively to sustain operations in the hope that prices of copper will rise. So, imposing windfall taxes will create further problems."
When reminded that windfall tax would be triggered at certain price threshold and the mines would not be affected until the price reached the trigger point, Dr Chigunta insisted that the mines would still have to meet obligations from their financiers.
"US$ 7,000 per tonne is currently the price the mines are break-even and they are still borrowing from banks to sustain operations. Even if the price reaches US$ 8,000 or more, they still have to meet those obligations from their financiers so they might need to use that money to pay off debts they have incurred due to a sluggish price of copper. Definitely it will not help, otherwise we might end up squeezing a dead horse which will not be good for the country," he said.
"We have to take into account the Chinese growth model, which is undergoing serious structural changes. China is moving up the value chain and the result is that demand for copper will not be as strong as it has been in the past years. So, we don't see the possibility of copper prices rising to that level, and what makes it worse is that even with other BRICS countries like Brazil, there is sluggish growth as well, so, demand for copper globally will not rise that much."
Dr Chigunta advised that the government should improve tax administration and management by strengthening ZRA to curb loopholes.
Labels: FRANCIS CHIGUNTA, TAXATION
Read more...
Taxation needs review - Mutati
By Kombe Mataka
Wed 18 Dec. 2013, 14:01 CAT
FELIX Mutati says the country urgently needs a comprehensive review of its tax regime in 2014. Mutati, a former commerce and trade minister in the MMD regime, told journalists yesterday that the review of the tax regime and tax laws was long overdue. He said what the country had been experiencing were piece-meal adjustments.
"What our biggest problem is in taxation in this country is capacity to administer taxation, capacity to ensure compliance for the various forms of taxes and the failure to assess to what extent we can include sectors of people in the tax framework. That is expanding the tax base," Mutati said.
He said if the government was able to build capacity, it would enhance high levels of revenue.
"As a country, we need to get to a place where we put concrete action in terms of how we address overall tax regime which covers the whole economy," Mutati said.
"If we are able to do that, there will actually be no need for us to issue Eurobonds. There is a tax law, for instance, which allows you to deduct these elements as part of your operating costs. Now, if the law says you can charge management fees and recover management fees, it doesn't say how much management fees must be recovered. So, what we need is to address those elements because international companies would obviously impose heavier management and consultant fees on the local operations as a way of getting money out, but our own law allows you to charge those fees against your profits. So, for me, I see the disease is how best we can address the elements that are recoverable for tax purposes. If you go to the income tax Act, it just tells you 'the following elements are allowable deductions for taxing purposes, without defining the perimeters - to what extent you can actually deduct, provided I have got an invoice."
Mutati said that a comprehensive review would also enable the government to identify areas for expanding the tax base.
"For us as Zambians, we shouldn't be focusing on just tax-lines. I think the overall focus must be how much taxation we are extracting from a particular sector as a total and how can we ensure that we take the tax that will still enable that sector or firm to be able to move and go forward?" Mutati said.
"Obviously, the mining sector is a big sector and heavily capital-intensive. If you take the one that we are hearing, Kalumbila mine, they are going to invest somewhere like U$2 billion. You are going to write off that investment over a period of time and, invariably, it will mean that in the early years, because you are going to have a lot of capital allowances that are going to rise, your net profit is literally going to be zero or you are going to be in a net loss situation. So, the dividend for the economy will come somewhere around five to 10 years later.
And Mutati said he was not in support of the re-introduction of the windfall tax.
"There were concrete reasons that made us remove the windfall tax and these reasons were formed by deep analysis, because from the taxation perspective, what we want to achieve is equity and fairness. Number two, the motivation should be induced by a tax framework, particularly, to anchor investment and thirdly to use taxation as a mechanism for growing the economy, not only in one sector, but also in the support sectors," he said.
Mutati said the levels of taxes that the mining companies were paying, the windfall tax and other forms of taxes inclusive, was in excess of 48 per cent compared to the overall taxation of other sectors which had a lower overall level.
"At that rate, obviously it would be choking business. Obviously when the PF got in government, they must have been exposed to the analysis and that is the reason they were unable to re-introduce it."
Labels: FELIX MUTATI, TAXATION
Read more...
Chikwanda proposes single account for non-tax revenue
By Kabanda Chulu
Fri 06 Dec. 2013, 14:00 CAT
FINANCE minister Alexander Chikwanda has proposed that non-tax revenue collected by quasi-government institutions such as PACRA should be put in a consolidated account at Bank of Zambia to ensure transparency and accountability.
But there have been concerns that affected institutions would face operational challenges and might even fail to retain qualified staff if funding is delayed from the government.
Moving the motion to amend the Competition and Consumer Protection, the Environmental Management, the Fees and Fines, the Patents and Companies Registration Agency and the Weights and Measures Bills, Chikwanda said fees and any other revenue collected by these institutions should become part of the national treasury.
However, Committee on Legal Affairs, Gender and Child Matters chairperson Jack Mwiimbu said witnesses interviewed at the Competition and Consumer Protection Commission and the Zambia Environmental Management Agency said operations of the entities would be affected.
"Mr.chairman, your committee was told that their budget flows will be affected and operations will be stifled if the national treasury suffers budget deficit. For instance, ZEMA requires timely funding to carry out its work and previously, they faced problems when they relied on direct funding from government," said Mwiimbu.
"We are aware that these measures are aimed at enhancing revenue collection and will ensure greater sharing but there are concerns that delayed or reduced funding might result in withdrawal of certain incentives thereby forcing qualified personnel to leave."
But Chikwanda assured that funds would be placed in a dedicated account at BoZ that would be ring fenced and ready for use whenever an emergency arose in the concerned institution.
"Their operations will neither be affected nor compromised and before money is deposited into control-99, funds necessary for operation including emergency activities will be availed," he said.
And Committee on Delegated Legislation chairperson Moono Lubezhi said witnesses interviewed at Patents and Companies Registration Agency and Weights and Measures Agency, also said provision of efficient services would be affected due to delayed funding.
"They said that funding should be timely and adequate to ensure smooth operations," she said.
In response, Chikwanda said all funds would be put to good use.
"Operational costs of these institutions will not be affected, all we want is to ensure these funds become part of general revenue and should be accounted for," said Chikwanda.
Labels: ALEXANDER CHIKWANDA, PACRA, TAX EVASION, TAXATION
Read more...
(TIMES ZM) Increase mine taxes – expert
Posted November 3, 2013
By JUDITH NAMUTOWE -
A LUSAKA-based economist Chrispin Mphuka has urged the government to reduce the rate of debt contraction and increase taxes from mines for more revenues.
Dr Mphuka said Zambia was increasing public debt at a fast rate, hence the need for sustained economic growth to have sustainable debt. He said this when he presented a paper on debt sustainability and a 2014 Budget reflection during the Economics Association of Zambia (EAZ) post-budget analysis breakfast meeting in Lusaka.
“We need sustained economic growth to have sustainable debt. Structural transformation must take place to ensure a more sustained growth,”
“So in the interim measures such as the 10 per cent export tax on copper concentrates are commendable as they encourage processing to ensure better prices.
“In my view copper blisters should equally be taxed. Only copper cathodes must not attract export tax,” Dr Mphuka said.
He said it was important to tax the mines more instead of contracting more debts.
Dr Mphuka said between 2002 and 2008, revenue from mine tax was 0.56 per cent of Gross Domestic Product (GDP), while the mines’ total earnings were close to 10 per cent of GDP.
This he said was due to over-generous tax concessions, under declarations because of fraud and a lack of capacity to monitor mining activities.
He said the only way forward in terms of resolving the problem was through revenue-based tax which he said was easier to administer and that it had stabilisers.
Dr Mphuka said the mines had over the years not paid enough in terms of taxes, hence the need for Government to consider coming up with revenue-based measures.
“Over the years, mines have not paid enough and this has come not just from me, but the International Monetary Fund (IMF), World Bank at one time and even cooperating partners.
“It is time that we sit down and see how we can tax the mines properly. And I believe the revenue-based tax is the best whether windfall or whatever, what is important is that revenue-based tax will be better in ensuring that mines declare accurate taxes,” he said.
Dr Mphuka said that debt sustainability also demanded that contracting of debt was done in a consultative manner, saying that Parliament should have the final say on what debts the country should have.
Dr Mphuka said Government’s policies should, however, be engineered at exporting processed goods.
Labels: CHRISPIN MPHUKA, MINING, TAX EVASION, TAXATION, WINDFALL TAX
Read more...
First Quantum dealings
By Editor
Mon 28 Oct. 2013, 14:00 CAT
COMMENT - Also see: Magande questions removal of duty on copper concentrates, By Chiwoyu Sinyangwe, Mon 28 Oct. 2013, 14:01 CAT
It is solliciting corruption, when it is legally possible for a minister is able to grant individual corporations tax exemption. The law must apply to all companies and all individuals at all time. It must not be possible fora company to approach a minister, and walk away with a tax exemption. Also, the Development Agreements were secretive and should all be scrapped for that rason alone. I say - nationalize the criminal enterprise. - MrK
The way our government is handling issues pertaining to First Quantum Minerals raises a number of issues and concerns. It is either those government officials responsible for the government's dealings and decisions concerning First Quantum Minerals are very corrupt and are receiving kick-backs or they are very incompetent.
First Quantum Mining has sued the Zambian government in the United Kingdom courts for allegedly abrogating the Bwana Mkubwa Development Agreement. The matter is now under arbitration and the Zambian government has filed in a plea to the claim by First Quantum Mining, who consequently submitted a counter claim based on the government's defence on September 25, 2013.
This same company, this same First Quantum Minerals that has sued the Zambian government, continues to receive benefits from our government and to be defended in all sorts of ways by some of the leading elements of our government. How is this possible?
On October 4, 2013, our government issued Statutory Instrument number 89 to waive export duty and allow First Quantum Minerals to export concentrates. This is difficult to understand for a government that wants to go and borrow hundreds of millions or billions of dollars on the international money markets. What is the purpose of us borrowing such huge amounts of money when we are allowing legitimate export duties not to be collected from First Quantum Minerals?
And why should First Quantum Minerals be exporting concentrates at a time when we have adequate refining capacity? Who can say they really know the other minerals other than copper that those concentrates contain? Again, there is something seriously amiss here; there is something stinking here. Is this a product of oversight, incompetence or outright corruption?
Whatever some may say or claim, it will not be wrong for anyone to conclude that Statutory Instrument number 89 was exclusively procured for First Quantum Minerals, which has stockpiled concentrates and does not want to export them because they will have to pay 10 per cent export duty on them.
First Quantum Minerals claims that there is no capacity in Zambia to treat concentrates. But this is contrary to what the smelter owners are saying. This is simply a strategy for avoiding to pay the correct tax to the Zambian government. And the Zambian government has allowed this to happen. Instead of collecting this duty, the government is opting to allow First Quantum Minerals to keep this money and burden the Zambian taxpayer with further national debt by going to borrow.
We have been advised by the international community, including the World Bank and International Monetary Fund, to collect more revenue from our mining activities. But what do we hear from our leaders responsible for these things? They are always defending the mining investors; they speak like they are directors of these mining companies. They seem to be more concerned about the profits of the mining companies than the benefits accruing to the Zambian people. Why? Again we ask: is it because of incompetence or it's simply a matter of corruption?
It is clear that the government is making the Zambian taxpayers subsidise the operations of First Quantum Minerals in this country.
When one critically analyses all that is happening, it is clear that the Zambian government is actually paying for the investment that First Quantum Minerals is putting in Kalumbila and other projects at Kansanshi. For what? Is it because someone in government is incompetent or is getting kick-backs from First Quantum Minerals?
And these people have no shame. They even went as far as trying to mobilise that clean man, that honest man, that apostle of our liberation struggle, Dr Kenneth Kaunda, to defend these clearly unjust and unfair dealings of First Quantum Minerals. Of course, Dr Kaunda, if he was told the truth, would never have agreed in any way to defend the interests of a company that is engaging in such unfair and unjust dealings against the Zambian people. There has been a strong lobby for First Quantum Minerals to have its permits, title deeds, Zambia Environmental Management Agency clearance to be processed quickly.
Regardless of the lawsuits that First Quantum Minerals has initiated against the Zambian government, whatever this company needs, it is still getting from our government. How is this possible?
First Quantum Minerals is claiming US$30 million from the Zambian government. The company has also stated that in the coming few months, it will be suing the government for US$2 billion for allegedly abrogating the Kansanshi Development Agreement. Surely, is this a company whose interests our apostle, our government should be made to defend and promote? There is definitely something wrong with those in government who are handling these issues. As we have already stated, it's either they have been bribed by First Quantum Minerals or they are extremely incompetent and not fit to hold the positions they hold in our government.
It is important for the Zambian people and their leaders to know what type of company First Quantum Minerals truly is. First Quantum Minerals is trying to portray itself as a very good investor when it is not. These dealings we are commenting on cannot be said to be acts of a very good investor. They actually project the very opposite.
The question is: should we continue as a nation to grant benefits to such a company? Should our government continue to allow such a company to operate in Zambia? Why should our government continue to be so nice, so kind, so generous to a company that is suing the Zambian state for over US$2 billion?
This behaviour is not new or strange to First Quantum Minerals. We shouldn't forget that this is the same company, the same First Quantum Minerals, that was kicked out of Congo because of similar behaviour or conduct.
We urge the Zambian government to be very transparent over matters pertaining to First Quantum Minerals. Given what is going on, it may be necessary for the Attorney General of the Republic to make known to the Zambian people these legal suits that their government is having with First Quantum Minerals. It is important for the Zambian people to have a direct say on these issues because those who are handling these matters on their behalf seem to be compromised; they continue to give incentives to First Quantum Minerals, ignoring its lawsuits against the Zambian people.
There should be no incentives or other benefits extended to First Quantum Minerals by the Zambian government until it withdraws its lawsuits against the Zambian people.
Why should the Zambian government give First Quantum Minerals title deeds to 600 square kilometres of land in North Western Province when the same company is demanding over US$2 billion from the Zambian people?
It is clear that there is some arm-twisting here, some blackmail here. But why should the Zambian government accept to be arm-twisted, to be blackmailed by First Quantum Minerals in this way? If there are Zambian government officials who have eaten First Quantum Minerals' money, promising to deliver all these things to them come what may, then let them give to First Quantum Minerals that which belongs to them and let the Zambian people hold on to what is theirs because they were not a party to those deals.
It's clear that right now, First Quantum Minerals thinks it is calling the shots. Yes, First Quantum Minerals may be calling the shots now. But for how long? This type of behaviour, conduct or deals cannot be sustained over the long term. It is such things that lead to nationalisations. They can be told to park their equipment and go. And in saying this, we are not in any way advocating anarchy. We believe in the rule of law. But what is happening borders on corruption and not legitimate business dealings. And the law punishes such conduct and practices.
Labels: ALEXANDER CHIKWANDA, CORRUPTION, DEVELOPMENT AGREEMENTS, FQM, NG'ANDU MAGANDE, TAX EVASION, TAXATION
Read more...
Magande questions removal of duty on copper concentrates
By Chiwoyu Sinyangwe
Mon 28 Oct. 2013, 14:01 CAT
NG'ANDU Magande has questioned the rationale behind finance minister Alexander Chikwanda's decision to remove 10 per cent excise duty on export of raw minerals.
On October 4, 2013, the government announced that it was suspending the 10 per cent duty slapped on the export of unprocessed copper and several other minerals in raw form for a year.
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 in the country's economic mainstay.
The tax made exporting copper concentrates less profitable, encouraging mines to use local smelters.
But according to Statutory Instrument No 89, which was signed by Chikwanda, the 10 per cent duty slapped on the export of unprocessed copper and several other minerals had been shelved until the end of September 2014.
"The export duty on ores and concentrates is suspended for free," the SI read in part.
"The regulation shall cease to have effect on 30th September 2014."
SI 89 comes on the back of the 2014 national budget, which proposes that effective next year, a 10 per cent export duty on semi-processed metals and base metals be widened to include copper blisters.
Commenting on the development, Magande, who is Zambia's longest-serving finance minister, said the government needed to tell the world what they wanted to do with the mining sector.
"It is a question of political will," Magande said in an interview.
"Our friends in the PF are not that determined to impose things that are going to help the country create wealth from our copper and get our people to do some jobs that are not complicated."
He said by allowing the export of copper concentrates and ores, the government would be undoing what Zambia had achieved under the MMD government to boost local smelting capacity as a way of adding value to raw copper exports.
"What is the philosophy of the PF government on mining?" asked Magande.
"Are they looking to value addition and processing in our country of the ores and raw materials. If we can't process all the copper into wires like at ZAMEFA, atleast, we should be getting some semi-processed copper as a way of industrialisation and creating jobs for our people."
According to SI 89, concentrates and ores the government has allowed to be exported include copper, cobalt, aluminum, nickel, lead, zinc, tin, chromium, tungsten, uranium or thorium, molybdenum, titanium, niobium, tantalum and vanadium.
SI 89 also covers concentrates and ores for precious stones such as silver and platinum.
On October 21, African Rainbow Minerals spokeswoman Jongisa Klaas was quoted by Bloomberg as saying: "We approached the Zambian government, asking for the 10 per cent export tax to be waived and we are appreciative of the government granting it to us."
African Rainbow Minerals jointly owns Lubambe Copper Mines with Brazil's mining giant, Vale, while ZCCM-Investment Holdings holds a 20 per cent stake on behalf of the government.
Lubambe, which was previously called Konkola North Copper Project, is a US$450 million copper mining venture that targets to produce 2.5 million tonnes of ore per annum with an initial production of 45,000 tonnes of copper per annum.
Chikwanda, before being appointed finance minister in September 2011, was instrumental in the setting up of Lubambe, which commenced producing copper concentrates on October 4, 2012.
African Rainbow Minerals was founded by Patrice Motsepe as South Africa's first black-owned mining company, although he is thought to have benefited from political connections when the ANC took over power and enacted laws on black ownership of industries.
Motsepe is currently the executive chairman of African Rainbow Minerals.
Separately, First Quantum Minerals, last month, said it was being "choked by stockpiles of unprocessed concentrates" due to inadequate treatment facilities in the country.
FQM, which operates Kansanshi Copper and Gold Mine in Solwezi, claimed it had stockpiled about 75,000 tonnes of unprocessed copper concentrate worth around US$133 million, which it could not export due to the 10 per cent levy on unprocessed mineral exports.
Previously, FQM used to send its concentrates for treatment to Konkola Copper Mines (KCM)'s Nchanga Smelter and the Chinese-owned Chambishi Copper Smelter.
Last July, authorities in the Democratic Republic of Congo raised taxes on copper and cobalt concentrate exports by two-thirds as it planned to ban the practice next year.
Much of the concentrates were processed by Zambian smelters.
On October 23, KCM strategy and business development director Brad Gnanasivam said the company's state-of-the-art smelter, which is the biggest in the country with a capacity of 300,000 metric tonnes copper cathodes, was operating at 50 per cent surplus capacity due to lack of feedstock.
Gnanasivam said the Outokumpu direct-to-blister smelter was very specific with the concentrates that it needed to be fed with and that it was important that local concentrates be blended with those sourced from Democratic Republic of Congo, which were richer in mineralisation.
Chikwanda proposed in the 2014 national budget to introduce a 15 per cent customs duty on copper blisters, copper powders and flakes, and lamellar structures and flakes.
According to the Zambia Revenue Authority, the customs due was intended to harmonise the tariff treatment of similar products and curb miscalculation and consequence avoidance of paying customs duty.
But Gnanasivam said export duty was inconsistent with SI 89, which repealed levy on copper concentrates.
"But we have an unusual situation," Gnanasivam said last week when he, Lubambe chief executive officer David Armstrong and Chibuluma Mines general manager Jackson Sikamo appeared before the expanded Parliamentary Committee on estimates representing the Chamber of Mines of Zambia. "We have a smelter that is smelting blisters that are 98 per cent copper, now suddenly has to pay 10 per cent tax but a producer of concentrates pays no tax. So, we are in an ironic situation where we are exporting a 30 per cent copper product at zero tax and you cannot export 98 per cent product because there is a tax."
Labels: ALEXANDER CHIKWANDA, CORRUPTION, NG'ANDU MAGANDE, TAX EVASION, TAXATION
Read more...
(STICKY) First Quantum dealings
By Editor
Mon 28 Oct. 2013, 14:00 CAT
COMMENT - Also see: Magande questions removal of duty on copper concentrates, By Chiwoyu Sinyangwe, Mon 28 Oct. 2013, 14:01 CAT
It is solliciting corruption, when it is legally possible for a minister is able to grant individual corporations tax exemption. The law must apply to all companies and all individuals at all time. It must not be possible fora company to approach a minister, and walk away with a tax exemption. Also, the Development Agreements were secretive and should all be scrapped for that rason alone. I say - nationalize the criminal enterprise. - MrK
The way our government is handling issues pertaining to First Quantum Minerals raises a number of issues and concerns. It is either those government officials responsible for the government's dealings and decisions concerning First Quantum Minerals are very corrupt and are receiving kick-backs or they are very incompetent.
First Quantum Mining has sued the Zambian government in the United Kingdom courts for allegedly abrogating the Bwana Mkubwa Development Agreement. The matter is now under arbitration and the Zambian government has filed in a plea to the claim by First Quantum Mining, who consequently submitted a counter claim based on the government's defence on September 25, 2013.
This same company, this same First Quantum Minerals that has sued the Zambian government, continues to receive benefits from our government and to be defended in all sorts of ways by some of the leading elements of our government. How is this possible?
On October 4, 2013, our government issued Statutory Instrument number 89 to waive export duty and allow First Quantum Minerals to export concentrates. This is difficult to understand for a government that wants to go and borrow hundreds of millions or billions of dollars on the international money markets. What is the purpose of us borrowing such huge amounts of money when we are allowing legitimate export duties not to be collected from First Quantum Minerals?
And why should First Quantum Minerals be exporting concentrates at a time when we have adequate refining capacity? Who can say they really know the other minerals other than copper that those concentrates contain? Again, there is something seriously amiss here; there is something stinking here. Is this a product of oversight, incompetence or outright corruption?
Whatever some may say or claim, it will not be wrong for anyone to conclude that Statutory Instrument number 89 was exclusively procured for First Quantum Minerals, which has stockpiled concentrates and does not want to export them because they will have to pay 10 per cent export duty on them.
First Quantum Minerals claims that there is no capacity in Zambia to treat concentrates. But this is contrary to what the smelter owners are saying. This is simply a strategy for avoiding to pay the correct tax to the Zambian government. And the Zambian government has allowed this to happen. Instead of collecting this duty, the government is opting to allow First Quantum Minerals to keep this money and burden the Zambian taxpayer with further national debt by going to borrow.
We have been advised by the international community, including the World Bank and International Monetary Fund, to collect more revenue from our mining activities. But what do we hear from our leaders responsible for these things? They are always defending the mining investors; they speak like they are directors of these mining companies. They seem to be more concerned about the profits of the mining companies than the benefits accruing to the Zambian people. Why? Again we ask: is it because of incompetence or it's simply a matter of corruption?
It is clear that the government is making the Zambian taxpayers subsidise the operations of First Quantum Minerals in this country.
When one critically analyses all that is happening, it is clear that the Zambian government is actually paying for the investment that First Quantum Minerals is putting in Kalumbila and other projects at Kansanshi. For what? Is it because someone in government is incompetent or is getting kick-backs from First Quantum Minerals?
And these people have no shame. They even went as far as trying to mobilise that clean man, that honest man, that apostle of our liberation struggle, Dr Kenneth Kaunda, to defend these clearly unjust and unfair dealings of First Quantum Minerals. Of course, Dr Kaunda, if he was told the truth, would never have agreed in any way to defend the interests of a company that is engaging in such unfair and unjust dealings against the Zambian people. There has been a strong lobby for First Quantum Minerals to have its permits, title deeds, Zambia Environmental Management Agency clearance to be processed quickly.
Regardless of the lawsuits that First Quantum Minerals has initiated against the Zambian government, whatever this company needs, it is still getting from our government. How is this possible?
First Quantum Minerals is claiming US$30 million from the Zambian government. The company has also stated that in the coming few months, it will be suing the government for US$2 billion for allegedly abrogating the Kansanshi Development Agreement. Surely, is this a company whose interests our apostle, our government should be made to defend and promote? There is definitely something wrong with those in government who are handling these issues. As we have already stated, it's either they have been bribed by First Quantum Minerals or they are extremely incompetent and not fit to hold the positions they hold in our government.
It is important for the Zambian people and their leaders to know what type of company First Quantum Minerals truly is. First Quantum Minerals is trying to portray itself as a very good investor when it is not. These dealings we are commenting on cannot be said to be acts of a very good investor. They actually project the very opposite.
The question is: should we continue as a nation to grant benefits to such a company? Should our government continue to allow such a company to operate in Zambia? Why should our government continue to be so nice, so kind, so generous to a company that is suing the Zambian state for over US$2 billion?
This behaviour is not new or strange to First Quantum Minerals. We shouldn't forget that this is the same company, the same First Quantum Minerals, that was kicked out of Congo because of similar behaviour or conduct.
We urge the Zambian government to be very transparent over matters pertaining to First Quantum Minerals. Given what is going on, it may be necessary for the Attorney General of the Republic to make known to the Zambian people these legal suits that their government is having with First Quantum Minerals. It is important for the Zambian people to have a direct say on these issues because those who are handling these matters on their behalf seem to be compromised; they continue to give incentives to First Quantum Minerals, ignoring its lawsuits against the Zambian people.
There should be no incentives or other benefits extended to First Quantum Minerals by the Zambian government until it withdraws its lawsuits against the Zambian people.
Why should the Zambian government give First Quantum Minerals title deeds to 600 square kilometres of land in North Western Province when the same company is demanding over US$2 billion from the Zambian people?
It is clear that there is some arm-twisting here, some blackmail here. But why should the Zambian government accept to be arm-twisted, to be blackmailed by First Quantum Minerals in this way? If there are Zambian government officials who have eaten First Quantum Minerals' money, promising to deliver all these things to them come what may, then let them give to First Quantum Minerals that which belongs to them and let the Zambian people hold on to what is theirs because they were not a party to those deals.
It's clear that right now, First Quantum Minerals thinks it is calling the shots. Yes, First Quantum Minerals may be calling the shots now. But for how long? This type of behaviour, conduct or deals cannot be sustained over the long term. It is such things that lead to nationalisations.
They can be told to park their equipment and go. And in saying this, we are not in any way advocating anarchy. We believe in the rule of law. But what is happening borders on corruption and not legitimate business dealings. And the law punishes such conduct and practices.
Labels: ALEXANDER CHIKWANDA, CORRUPTION, DEVELOPMENT AGREEMENTS, FQM, NG'ANDU MAGANDE, TAX EVASION, TAXATION
Read more...
FQM urges govt to guarantee tax stability
By Gift Chanda in Solwezi
Mon 09 Sep. 2013, 14:00 CAT
CANADA'S First Quantum Minerals has urged the government to guarantee tax stability in the mining sector.
The call comes as the government starts preparing the 2014 national budget, which analysts say may see significant tax increments to help the PF government finance its ambitious infrastructure projects and to seal the widening budget deficit.
"If taxation is stable and we know we are going through the next five or 10 years without changes it would be nice," Tristan Pascall, an assistant general manager at FQM's Kalumbila Mining Limited, said in an interview.
"What is important is that we can see the future. If things keep changing every week then we can't see the future."
He said FQM had had discussions with the government concerning deals to guarantee policy stability.
"We are very happy with the encouragement the government provides to investments but what we need is stable taxation. That is the number one thing we need," Pascall said.
"Once stability is guaranteed, then people can make investment decisions because then we can compare Zambia to Peru or Peru to Australia or Australia to Canada or Zambia to South Africa. But if you keep changing, then it becomes so hard."
He said taxation was already heavy in Zambia.
The government in 2011 doubled mineral royalty taxes to six per cent as it sought more benefits from the country's mineral wealth.
"If the royalty taxes change upwards, it is going to impact us," Pascall said.
On the 10 per cent levy on the export of ore and concentrates, he urged the government to waive it, saying it threatened the Enterprise and Sentinel operations.
Zambia, Africa's biggest copper producer, introduced a 10 per cent levy on the export of ore and concentrates in November 2011 to increase local value addition to mineral products.
The government waived the levy for the export of manganese ore and concentrate in February last year.
"We are currently building a smelter at Kansanshi but if the Sentinel operation commences before the smelter is complete, then we are going to have a problem. We are going to be jammed with concentrates and we will not be able to export if that 10 per cent levy still stands," Pascall said.
First Quantum has a 75,000 tonnes stockpile of copper concentrate worth US$133 million at its Kansanshi mine, about 10 kilometres north of Solwezi, Pascall said, adding that capacity to smelt it was lacking due to increased production.
FQM is also developing the Sentinel copper project, which is the first of the three potential mines at the new large-scale project in North-Western province.
Its second mine to be developed will be the Enterprise operation, which will be the only nickel producer in the country after Albidon Limited halted operations at its Munali mine in December last year.
The Enterprise will produce 38,000 metric tonnes of the stainless steel raw material annually in its first phase and output will be ramped up to 60,000 tonnes in the second phase.
There are currently no nickel smelters in Zambia.
Labels: FQM, TAXATION
Read more...
ILGAZ implores govt to re-introduce grain levy
By Kabanda Chulu
Tue 13 Aug. 2013, 14:00 CAT
THE government should consider re-introducing the grain levy to help broaden the revenue base for councils, says Institute of Local Government Administrators of Zambia vice-president Bwanga Kapumpa.
And local government deputy minister Nicholas Banda has advised town clerks and council secretaries to familiarise themselves with the PF manifesto as they implement government policies.
During the 2013 ILGAZ annual general meeting and graduation dinner in Lusaka on Sunday night, Kapumpa said the system of local government had been abused in the past.
"In the past, central government treated local government as opponents instead of partners. We commend the PF government for changing things and for giving a clear road map on decentralisation. Once implemented decentralisation will create jobs and improve social service delivery," said Kapumpa. "We are happy that has taken over the wage bill but we need other grants that have been taken away and we also urge government to reconsider bringing back the grain levy to help broaden the revenue base especially for councils located in rural areas."
ILGAZ president Dan Longwe said the institute has proposed a draft bill to the government that would regulate professional conduct of members through an Act of Parliament.
He also proposed that councillors should be properly oriented in the field of local government and corporate governance if positive change is to be seen in councils.
Officiating at the function, Banda said the government was putting in place policies aimed at uplifting people's lives through service delivery.
"Meaningful development will only come if powers and resources are devolved to local authorities and this is why we shall implement the decentralisation policy and we expect ILGAZ members to strictly follow guidelines when administering constituency development funds and other resources in order for people to benefit," Banda said.
He advised councils to reposition themselves and embrace public-private-partnership (PPP) initiatives to enhance service delivery to people.
"Government will continue providing salaries for council employees so that locally generated resources are channeled to social service delivery but councils should also embrace PPP initiatives as well as getting familiarised with the PF manifesto as they implement government policies," said Banda.
ILGAZ admitted 14 town clerks and council secretaries as fellows and associates of the institute.
Labels: ILGAZ, TAXATION
Read more...
(LUSAKATIMES) Some Mining companies seeking tax relief from Government
Time Posted: August 8, 2013 6:55 am
SOME mining companies on the Copperbelt have appealed to Government to consider exempting them from paying certain taxes to enable them recover from the high production costs they are incurring due to the fallen copper prices at the London Stock Exchange.
Sino Metals Leach Zambia Limited, NFC Africa Mining and Luanshya Copper Mines (LCM)
say they are making losses due to the high production costs they are incurring.
The three mines made the appeal when Minister of Mines, Energy and Water Development Christopher Yaluma visited their premises to familiarise himself with the challenges they are facing.
Sino Metals chief executive officer Xie Kaishou said his company has exhausted all resources from the tailings dam and that copper production has dropped drastically.
“Last year, our copper production dropped from 7,000 to 5,000 tonnes due to lack of resources. This year, production is expected to drop by 4,000 tonnes. We are really operating at a loss,” Mr Xie said.
He said with the increase in copper prices at the London Stock Exchange, the company is struggling to meet high production costs.
Mr Xie, however, assured Government that all the jobs for the local people will be protected despite the numerous challenges the company is facing.
He also said Sino Metals plans to invest about US$70 million into the Mwambashi Mine Project which will create 600 jobs for the local people and extend the mine’s lifespan to seven years.
Meanwhile, LCM chief executive officer Luo Xingeng said the lifespan of Baluba Mine is expected to finish in the next four years due to limited resources.
Mr Luo said Baluba Mine is important because it is the largest employer in Luanshya with more than 3,000 people working at the mine.
“We are appealing to you the Government to exempt us from paying certain taxes, we are operating at a loss. The Baluba Mine only has a life span of four years,” he said.
And Mr Yaluma assured the mining companies of continued Government’s support in addressing some of the challenges they are facing.
He, however, urged the mines to anticipate challenges such as low copper prices on the London Stock Exchange when doing their business plans to maintain their cash flow.
“Wherever we have been, mining houses are complaining about high production costs. We as Government, we are here to listen to your problems, engage us so that we can see how we may help you.
“However, it is important that you forecast challenges of low copper prices when doing your business plans,” Mr Yaluma said.
He said Government is not rigid and will endeavour to create policies that will help investors to grow their businesses and create job opportunities for the local people.
Labels: MINING, TAX EVASION, TAXATION
Read more...
