MUSOKOTWANE’S MINING POLICIES HAVE ALWAYS ROBBED ZAMBIA OF BENEFITS FROM ITS NATURAL RESOURCES
Dear Editor,
I AM afraid to say that Dr. Situmbeko Musokotwane, the Finance and National Planning minister is back and is back to rob the country of its desired benefits from its endowed natural resources. In 2008, Dr Musokotwane abolished the windfall tax, and that’s the last time Zambia genuinely benefitted from the mining sector. He is back to hand back the mines to unknown investors and he is laying ground for a tax regime that benefits investors and robs the country of discernible revenue.
MINERAL ROYALTY TAX Mineral Royalty Tax is not a fee it’s a tax. Currently it’s paid as final tax by both loss making and profit de claring mining companies as a final tax. So it is net tax income to the Zambian people. In the last 25 years only Kansanshi and Kalumbila have been declaring profit and pay ing both mineral royalty and company income tax.
If you look at the ownership of the two companies you can safely say one mining company in Zambia was paying company income tax – FQM in the last 25 years. With the careless tax concessions the government has given to mining companies at a time when the price of metals is very high, at the time government on behalf of the people should have max mised benefits from the industry, means that even FQM company income tax will disappear including Lumwana and Lubambe who were about to be profitable because mineral royalty will now be a deductible cost from profits before tax. Here is what the Zambian people must know. First Quantum Mining pledged that if government made miner al royalty tax deductible, they will in return invest USD2 billion in Zambia and increase production to not less than two million tonnes per year. Does that sound familiar? The Minister of Finance Dr. Situmbeko Musokotwane is repeat ing recycled ideas he practiced when he was Finance minister under President Rupiah Banda.
He abolished windfall tax and made mineral royalty tax deduct ible. We must be quick to remind Zambians that Dr Musokotwane borrowed 25 percent of the current Zambian debt and gave careless tax concessions to various companies, a method he has repeated. With the new mining policy he is pushing, there will be two out comes as follows: 1. Mine houses will benefit from these concessions and make super profits and externalise the money. As we have seen in the past with Vedanta who repeatedly pledged $1.5 billion in 10 years, FQM and others will not bring the desired investment. There is no law that will hold them accountable for the promise of the US$2 billion investment and Dr Musokotwane will be beaten pants down and the copper and other minerals so mined and taken out will be gone forever; 2. In the unlikely event that decency “ne nsoni” or Ubuntu pre vails, FQM will use the same extra money saved from tax conces sions after exporting Zambian minerals to reinvest in Zambia. So Zambians will capitalise FQM through forgone tax revenue. What a shame! It is on record that only FQM and only FQM had laid a complaint regarding double taxation with non-deductible mineral royalty tax and Company Income Tax. Why haven’t the technocrats in govern ment addressed this specific issue instead of mutilating the solid rev enue base from the industry? One option was to reduce Income Tax to five percent from 35 per cent or even reduce to zero percent and compute MRT at a level that protects Zambians. Why do mining companies love income tax? Simple, it facilitates transfer pricing and exaggeration of costs to declare lower taxable income. Why do mining houses dislike Mineral Royalty Tax? It’s based on extracted minerals and easy to
administer by ZRA but difficult to cheat. Remember this please, countries with deductible MRT and lower taxes in this industry have higher stakes or even controlling shares in private mining companies. So they collect lower taxes and get dividends. In Zambia some mining companies are 100 percent private. Why such concessions? Please, let’s fight Dr Musokotwane’s penchant for pro investor in terests and policies that permanently rob the country of its revenue from its natural resources.
MIKE THEO HAMBULO,
Economist, Consultant.
