The PF President Michael Sata wrote to the President Banda on August 12, 2010 with what appears to be a restatement of their 2008 position that the mines are overtaxed. I am trying to see if we can get hold of the full letter and then provide a fuller assessment. But here are the extracts from the letter as published by the Post - if the narrative holds in the full letter, this would represent a deeply flawed position (and complicated politically) :
I realise that the mines are mostly in areas where my party [Patriotic Front] dominates, but it would appear that no one in your government is aware of the damage the ongoing dispute [dispute between government and mines] is doing to the industry and to jobs on the mines.
Maybe no one in your government cares about the jobs that are being sacrificed by the delinquent and illegal tax regime introduced by the previous government....It is possible that your government would care if it stopped to think that loss of jobs in the mining industry carries its effect into all other parts of the job market, possibly even into areas where your party is strong.
As I remarked to your predecessor, the calculation that mining companies were paying 47 per cent tax was in fact wrong.
My party looks with envy at the wealth of Chile, a country which used to produce less copper than our wonderful country but now produces ten times more than Zambia. It is very easy to see, for anyone who is prepared to look that the entire Chilean economy has benefited enormously from a healthy mining industry.
Our government will move toward emulating Chile where the tax rate on mines is less than 35 per cent and where investment is thereby encouraged and jobs are created.... We believe it is necessary to be competitive with the best countries, not the worst. I am distressed to learn that your current Minister of Finance and his cohorts are pressurising the mines to capitulate to the previous government’s demands. I know this is because I can see all the investments that should be taking place and creating jobs are just not happening.
I wouldn’t be surprised, if he continues down this road, to see our country launched into a very public international legal case brought about because your party doesn’t honour agreements. This will no doubt cause us to lose even more investment and jobs....Your Excellency, you and I are old enough to remember what happened to the mining industry in the first Republic. 100 per cent ownership and therefore 100 per cent taxation curtailed all investment in the mines by ZCCM, leading to the impoverishing of our country. We had to beg for our daily bread from the World Bank and other donors.
Thanks the country’s debt has been forgiven because we all know how servicing that debt was further impoverishing us all. It worries me that your government and its misguided policies are going to put us right back in that situation.....
Zambia needs international investors more than they need us. In order to retain and attract these investors, we must honour our agreements and also establish a stable, predictable, attractive and unambiguous tax regime. We cannot afford an adhoc tax regime. You may remember before the mines were nationalized whenever copper prices where high the miners of all ranks received a copper bonus.
Further, Your Excellency may remember that on 24th October, 1964 because of a stable, predictable and attractive tax regime, the New African government under UNIP inherited 764 million British pounds. Today, we have high copper prices what is the benefit to Zambia and its people?....