Maravi

Zambia has lost $600m in mine tax revenues – Milupi

Zambia has lost $600m in mine tax revenues – Milupi
By Chiwoyu Sinyangwe
Sat 06 Feb. 2010, 04:00 CAT

ZAMBIA has lost an estimated US $600 million in mine tax revenues following the government’s abolition of the windfall tax last year, Luena independent member of parliament Charles Milupi has observed.

Milupi said it did not make economic sense for President Rupiah Banda to propose to borrow commercial loans from the World Bank for infrastructural development for mining activities when the country was not deriving corresponding economic benefits.

Milupi, who is also former chairperson of the parliamentary public accounts committee (PAC) was commenting on revelations by President Banda to World Bank president Robert Zoellick that Zambia was trying to seek higher interest loan facilities from the Breton Wood institute to finance the repair of roads damaged by mining activities in the country.

President Banda said Zambia was considering borrowing from the International Bank for Reconstruction and Development (IBRD) window for financing crucial infrastructural projects.

Borrowing from IBRD, a non-concessional window, attracts interest rates of between three to three and half per cent while disbursement of financing for projects by World Bank through the International Development Association (IDA) window is done through grants and soft-loans.

Milupi said if the country had maintained that popular windfall tax, the Treasury coffers would have been boosted enough to fund infrastructural development in mining activities without borrowing from the World Bank.

He wondered the logic behind lowering taxation rate to the mining firms when key Western donors were trying to increase revenue, through taxation, from banks that were bailed out using public funds at the height of the global financial crisis.

“Specifically they are talking about infrastructural development in mining areas,” Milupi said.

“That is good because if you look at roads on the Copperbelt, they require to be tarred, most of the towns like Mufulira, Kitwe are like ‘ghost towns’, the state of the roads is deplorable and they need to be improved upon. But this is the government that is now going to ask for commercial loans, higher interest loans, when not too long ago, despite well reasoned arguments that we gave them, they gave up on raising money from using country’s resources – the windfall tax. For this year 2010, if you look at the planned production figures and also where the copper price is, we are talking about having lost in the range of US $600 million.”

“Now, this is the government that is giving up on collecting our own money because the concept of windfall tax is acceptable world over, Western countries like America, even as we speak now, are putting in place measures to try to gain windfall tax in as far as bonuses of banks are concerned.”

He said key donor countries had always backed the country’s plan to raise mine taxes.

“Now this is the government that gave up windfall tax on mining and now they have to go and borrow commercial loans to develop infrastructure in an area where the mines are making these huge profits,” he said.

“It does not tie up. By using our own money, you see the people who give us donor aid are saying ‘why should we give you our tax payers’ money when your own money is going elsewhere outside the country?” We could have avoided borrowing by using revenues from our own resources.”

He warned that the country risked slipping into another debt trap for as long it did not grow capacity to pay back the fresh loans being contracted.

Milupi said the country should look more towards the grants as well as concessionary loans for infrastructure development.

“Loan contraction is very serious business of a country because Zambia was almost sunk by the US $7.2 billion debt until the lenders decided to forgive us,” said Milupi.

“But already from the time they forgave us, we are now back to over US $2 billion which is a very worrying trend. So, we thought that after that forgiveness, loan contraction will be with extreme care, that is why some of us are insisting on parliamentary oversight before loans are contracted, it’s for the reason that we understand that the loans are going to be used for intended purposes and that they have been contracted at acceptable interest rates.”

Labels: CHARLES MILUPI, TAXATION, WINDFALL TAX, ZOELLICK

posted by MrK @ 3:50 PM