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Monday, 2 July 2007

An environmental tax on mines?

It appears that there's an endless pursuit to extract revenue from the mining companies. The latest suggestion is that an environmental tax should be imposed. The Post Newspaper reported during the week that:

“Wildlife and Environmental Conservation Society of Zambia (WECSZ) has supported suggestions made to the government on the introduction of an environmental tax on mining companies in the country”.

“….environmental tax [should be] introduced for the sake of safeguarding our environment. It is true that land being used for mining activities can never be used for something else. For example, copper mines are very huge and cannot be used for agriculture or other activities apart from mining. These areas are almost dead and very little is being done by these companies in terms of initiating environmental programmes in the communities they operate in” It appears to me that WECSZ has two reasons in mind.
I don't share the WECSZ environmental tax position for two reasons:

First, WECSZ wants a tax for starting business on land because it believes somehow that our land is scare and therefore needs safeguarding - “environmental tax [should be] introduced for the sake of safeguarding our environment”. I don’t buy this reason because if it is about safeguarding land, it should be before mining operations start, not after they have started. It seems to me that where concerns exist on environmental matters they should be dealt through regulations that work before mining activities start not taxes on mining operations. The reason advanced by WESCZ therefore appears not genuine.

Secondly, WECSZ believes that this is a good way of leveraging investment into the local community. In the above quote Mr Kalaluka says “For example, copper mines are very huge and cannot be used for agriculture or other activities apart from mining. These areas are almost dead and very little is being done by these companies in terms of initiating environmental programmes in the communities they operate in”.

If this is the real reason, then we need a broader framework for leveraging local investment into wider social goals not just for the environment. Crucially it should a framework based on on giving contributions to local authorities not a punitive tax. There are non-tax based measures that could used – taxing mines to leverage investment or achieving environmental goals is not the appropriate way to proceed
. An example of such an approach has been discussed here in the context of transport infrastructure.

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