Thursday, November 25, 2010

Rejecting windfall tax is scandalous - Magande

Rejecting windfall tax is scandalous - Magande
By Joseph Mwenda and Florence Bupe
Thu 25 Nov. 2010, 04:01 CAT

NG’ANDU Magande yesterday said it is scandalous that the mining sector in Zambia is contributing less than ten per cent to the gross revenue collections. In an interview Magande, a former finance minister, observed that his successor Dr Situmbeko Musokot-wane was resisting the re-introduction of windfall tax because it was introduced by people he did not like.

“This is scandalous, to say the least, to get less than ten per cent of the total revenue from a commodity which is not replaceable. What these people who are calling for windfall tax are saying is very important. Let Honourable Musokotwane forget the name ‘windfall tax’. If they are so scared and are afraid of windfall tax because it came in Mwanawasa’s speech, because it came in Magande’s budget, let them find other names that are suitable to their ears and their tongues, as long as it earns more money out of what is being extracted and leaving holes for us,” Magande said.

He said ordinary citizens were responsible for safeguarding minerals so it was important to explain to them how much they earned out of the resources. He observed that with the current variable tax, many companies would manage to evade tax because the revenue authority did not have a mechanism for auditing the profit and loss accounts for the investors.

Magande said Musokotwane was confusing himself by saying that windfall tax was not acceptable in the current MMD regime when he had introduced the same tax to the telecommunication sector.

“He is saying on page 22 of his budget speech, ‘In this regard the telecom companies that will generate US $250 million kwacha profit or below will continue to be taxed at 35 per cent, while any profits above 250 million will now attract tax rate of 40 per cent’; isn’t this windfall tax?” Magande asked.

He said the telecommunication sector needed to be motivated because it was key to other developmental sectors.

And FDD leader Edith Nawakwi has said the government should stop making Zambians finance the copper mining sector through failure to implement the windfall tax on mining houses.

Featuring on Radio Phoenix’s Let the People Talk programme on Tuesday, Nawakwi said ordinary Zambians were subsidising the copper mining sector through the high exchange rates prevailing in the country.

Nawakwi expressed disappointment that learned officials were supporting the government’s stance on the windfall tax and were failing to acknowledge the benefits that the implementation of the windfall tax would have on the growth of the national economy.

“It is a sheer lack of understanding of what windfall tax means. Windfall means something you didn’t expect… when we say windfall tax, we mean a charge on the profit which we didn’t expect,” Nawakwi explained.

She said at the time the government implemented the collection of windfall tax from the mining houses, revenue contributions from the mining sector increased significantly.

Nawakwi said Zambia was bound to lose out on the attractive copper prices on the international commodities market if the government insisted on not effecting windfall tax on mining houses.

She urged the government to take a leaf from Chile, which was able to realise about US $12 billion from its mining activities because of policies that ensured that the country benefits from the sector.

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