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Sunday, 20 September 2009

Blindspots (Rupiah Banda)

"The removal of windfall tax will not lead to loss of government revenue as the variable tax still captures any windfall gain that may arise in the mining sector"
President Rupiah Banda ignoring common wisdom of tax collection. Although many agree that theoretically the profit variable tax can go some way in capturing the necessary revenue from higher copper prices, a windfall tax is easier to implement. It is also easier for the public to check how much revenue government is getting in its coffers. With a profit variable tax it is an accountant's job! Multi nation companies love profit variable taxes because it is easy for them to hide their profits through inflated costs and so forth. Simply put, the mining companies have smarter accountants than the Government. This is why the mining companies have been pushing for removal of the windfall tax. They know they'll pay very little.

More importantly, the President is alone in thinking the current situation is ideal. Only yesterday, the European Union called the current situation "depressing" and asked the Government to review its position by increasing the level of tax and improving collection. Simpler taxation mechanism are key to improving collection.


  1. "The removal of windfall tax will not lead to loss of government revenue as the variable tax still captures any windfall gain that may arise in the mining sector"

    The statement that the removal of the windfall tax 'will not lead to loss of government revenue' is idiotic, because it already has.

    Remember the companies that paid the tax, about 400 million, and the rest that didn't? And that those companies that paid it threatened to sue the government to get it back?

    And if it makes no difference in tax collection, why are the mining companies against it?

    This Finance Minister and government are bought and paid for by the mining industry.

    The corporate corruption continues, and did not end with the development agreements.

    The reason the mining companies did not complain for a second about the raising of corporate income tax from 25% to 30% is because they pay no income tax. In 2004, out of a profit of about$2400 million, Zambia collected $6 million in taxes. So of course they are not worried about raising the income tax, even to 50%, or 75%. They simply don't declare a profit.

    On the other hand, the windfall tax is a tax on revenues/turnover, and is very easy to collect and monitor, so they and their bought and paid for parliamentarians and 'free traders', were up in arms against it.

  2. Well, it's easier to beg for aid, isn't it? Look what lengths the LPM govt went to in qualifying for HIPC, and what arguments they put forward. They practically rounded up each and every NGO at home and abroad to lobby for them.

    Yet, when the same so-called donors ask that we raise our own money through taxes, the RB govt suddenly has inertia.

    The mining companies would not have argued so strongly, even threatening legal action, if it wasn't going to cost them more in taxes.

  3. The foreign NGOs are our best bet I think.

    Last time LPM was persuaded by several reports by NGOs who started shaming the mining companies...and lobbying their own governments..

    It strikes me that the government only moves when foreign governments mobilise and tell us what to do..

    Its sad, but that the reality..those who want change have to take that as given...

    "Townhall meetings" don't work in Zambia!



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