Plans by Zambia, Africa’s largest copper producer to revisit the aborted windfall tax may be beneficial to the country but other players in the mining industry fear for its collapse.
Zambia’s mines minister recently stated that the country wanted to revisit the windfall tax and other forms of taxations to enable the country make real returns from its mineral wealth but the mines contend that the planned decision might cause more harm to the sector than good. Others fear that the motive if executed might raise concerns over the investors’ security of tenure on their investment in the mines.
Mr Fred Bantubonse GM of Chamber of mines said that calls for the re introduction of the windfall tax among others will not help Zambia’s economic growth but will instead strain operations of the mines.
He said that the windfall tax is not in the best interest of either Government or mining companies as the re- introduction of the tax will shrink the mining industry. Windfall tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry.
In 2008, former President Mr Levy Mwanawasa revised the mines and minerals Act and introduced the windfall tax which according to government estimates was expected to provide the country an average USD 415 million in revenue per annum. The windfall tax was introduced by Government in 2008 and later revised to variable income tax.
It was however, short changed under President Mr Rupiah Banda the following year following an outcry from the mining companies that the decision was going to choke the industry. Mr Banda was supported by among other government officials, then finance minister Mr Situmbeko Musokotwane who contended that the growth the mining sector was experiencing would not be disrupted and that Zambia risked scaring away all the investment generated in Zambia’s mines in excess of USD 6 billion with Chinese companies taking 80% of the total investment.
However, in his arguments, Mr Bantubonse contends that what Zambia needs are taxes that guarantee benefits for both Government and investors unlike the ones that choked the much-needed investment. Taxing mining companies based on the profits could scare away investors who have invested heavily, created direct and indirectly jobs for Zambians and are already paying variable tax.
The variable income tax system ensure that income from all the profit above normal is collected but the system spares companies from being taxed on their normal revenue.
Mr Bantubonse said that there is a different windfall tax already in the country in the name of variable tax introduction of windfall tax may not help the country the problem is that a lot of people are under the impression that mines are not paying tax. For any tax to be acceptable, it must allow investment to grow and business to be sustained. What Zambia needs is a win-win situation and not a condition that would kill the industry
Recently, Mr Wilbur Simuusa mines minister of Zambia said that the PF government will revisit the issue of windfall tax with full consultation of stakeholders to have a win win situation.
(Filed by Mr Kapembwa Sinkamba SteelGuru Correspondent Zambia)
