Refusing windfall tax is an injustice – Sardanis
By Joe Kaunda and Chiwoyu Sinyangwe (The Post)
Fri 12 Nov. 2010, 04:01 CAT
And Sichinga, who has described President Rupiah Banda and Dr Musokotwane as unpatriotic for opposing the reintroduction of windfall tax, has charged that despite increasing pleas for maximising revenue collections from the mining sector, the government has continued to be adamant and irresponsible.
He said it was in this vein that campaigning on the platform of increasing tax collections from the mining sector would determine how serious the opposition political parties were to the governance of this country.
The mining sector which contributes about 70 per cent of the foreign exchange earnings and about 11.2 per cent of the country’s gross domestic product only accounts for just over one per cent of the revenue collections by the Treasury.
“I am suggesting that if political parties were serious, they should make this a campaign issue,” Sichinga said.
“They should say to the people that we are failing to get development because your government is not serious about obtaining the benefits of our God-given endowment to your country. So, if I were in politics, that is exactly what I would be saying. I will be making this a campaign issue that ‘the government is irresponsible, not being patriotic and failing to do what is necessary’. Why tax you and I at 35 per cent and tax the mines almost nothing?”
Sichinga said the re-introduction of the windfall tax should be also debated in Parliament and those members of parliament (MPs) who oppose it should be exposed and de-campaigned.
He charged that President Rupiah Banda and Dr Musokotwane were not patriotic to this country.
“Why would any patriotic citizen or leader stop that windfall tax? That issue is so crucial such that the civil society and ordinary citizens will continue to argue they must impose that tax,” Sichinga said.
“I am also urging Parliament to reintroduce this topic and even if they get defeated, they must ask for a division and we must know which people are supporting the government over this failed and imprudent manner of taxing the mines. They should be named during the campaigns that these are the people who refused to have taxes imposed on the mines and let them go to the Copperbelt and campaign on that basis.”
He observed that the current regime favoured getting underhand payments from the foreign mining firms at the expense of the country.
“What justification is there? What is clear is that the government wants to benefit from these mines by them giving them campaign monies and that is why they are not imposing these taxes,” he said.
“There is no other reason. We have written, we have spoken, we have made our case… Dr Musokotwane, the president and their cabinet have not given us any justifiable reason why they mine should not being paying taxes.”
Sichinga also dismissed assertions by the government that windfall tax on the mining sector would scare away investors.
He said evidence has shown that countries that were increasing taxation in the aftermath of the global economic crisis remained stable as no investor had shown any signs of movements.
Sichinga also rejected Dr Musokotwane’s insistence on the application of variable profit tax as not feasible because the government does not understand the cost structure for most mining operations.
“In our country, the mines have different costs of production but the maximum you can expect from even the ones with the lowest ore content is not to go beyond U$ 2, 000 per tonne,” he explains. “That means they are making super profits between the US $2, 000 mark and the US $8, 000.”
He further dismissed the announcement that the government would audit mining firms for tax compliance.
“They are saying they are going to carry out an audit of what has been exported. It means they don’t even know what has been exported at the moment,” said Sichinga. “Otherwise why would they be asking for an audit now? What have they been doing all along? On what basis have they been taxing the mines in terms of the exports? It frightens me that you can have a government saying that they are going to carry out an audit and yet they are arguing that the mining companies would leave Zambia if they were to impose taxes.”
He reminded the government that with windfall tax, nobody would be taxing the mines when they made losses or when the copper price fell below an agreed level.
THE PF government has a challenge of creating 5.5 million jobs for Zambians, says Bob Sichinga.
And Sichinga says the government will not burden mines with taxes in order to give them more capacity for increasing jobs for Zambians.
Addressing the Copperbelt Business Community in Kitwe on Monday, Sichinga, who is Minister of Commerce, Trade and Industry, said the government wanted every Zambian to take an active role in delivering the much-needed development in the country.
He said 300,000 young people were offloaded on the job market annually and yet only 5,000 had an opportunity of being employed, leaving about 295,000 on the streets without jobs.
“As though that was not enough, tertiary institutions, trade schools, colleges and universities can only take at the moment 13,000 of them. There is no avenue of absorbing this number that is coming out of schools. That’s why the manifesto of the PF emphasises job creation because these numbers are swelling now and we are not able to manage. We already know that there is this huge problem and we will address it,” Sichinga said.
He said his ministry would utilise the instruments of planning and development such as the Medium Term Expenditure Framework, the Sixth National Development Plan and the Vision 2030 to deliver the much-needed development in the country.
Sichinga said the development that was taking place in the country should benefit all the citizens and not just a few privileged individuals.
He said the PF made it clear even at the time it was in opposition that it would engage people in various productive areas as a way of creating jobs, lowering taxes to reduce the cost of doing business to put “more money in people’s pockets”.
“In the mining sector the benefits must flow not just to the top mining companies, medium companies and foreign investors. It must flow to our own people and that is the purpose of economic management and policy. The cost of living must be reduced while the standard of living must be raised,” Sichinga said.
And Mine Suppliers and Contractors Association of Zambia president Fanwell Banda said the business of trade in the mining industry should entirely be left to Zambians if the country is to realise any tangible benefits from its rich mineral wealth.
Banda said government must put up measures to ensure that any foreign company coming in the country partners with Zambian firms.
“There ought to be transparency and accountability in the operations of the mines,” he said.
Banda said those involved in the manufacturing and supply of goods to the mines must be supported by the government through provision of incentives to ensure the growth of the manufacturing industry.
And during a tour of Kansanshi Mine in Solwezi on Sunday, Sichinga said the PF government wanted to create more wealth and jobs and hence would not pressure mining firms with inhibiting circumstances which might lead to stunted growth in job creation.
“We want to lower taxes so that they mining companies can work effectively,” Sichinga told journalists at Kansanshi Mine after touring the firm’s North West and South West open pit sites.