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Wednesday, 6 October 2010

How the copper mines won, 3rd Edition


It has been a while since we last checked on the copper prices. Another look make sad reading for our nation. It confirms the general upward trend - I believe it may not be too long before copper breaches the magic 10. We have of course long breached the copper price level at which President Mwanawasa introduced the windfall tax (in January 2008), with prices now above$8000 per tonne. The windfall tax was designed to match rises in the price of copper: it was set at 25 percent while copper sold for $2.50 per pound, 50 percent for the next 50 cents and increased to 75 percent when copper fetched above $3.50 per pound.

The key important point is that we are now above the $3.50 per pound (the maximum marginal tax rate), and we are likely to remain above that threshold for sometime - at that price level Zambia would have earned a substantial windfall to invest money into serious poverty reduction and infrastructure development. I am not saying it would be paradise because the same incompetence that has removed the windfall taxation would have been administering revenue, but I am saying that we would be in a far better position than we are currently. Well you can now see who is laughing now - its certainly not the poor grandmother in Samfya with ten orphans to look after, thanks to the scourge of HIV/AIDs.

I have previously addressed each argument marshaled against revising the windfall tax - see Eight reasons against higher mining taxes. I have still to hear any new cogent counter argument. The jury has truly rested. Our poor people are being robbed in broad day light. Who shall speak for them?  I am sure there's a bemba proverb for this, though I cannot think of one right away!

1 comment:

  1. The key important point is that we are now above the $3.50 per pound (the maximum marginal tax rate), and we are likely to remain above that threshold for sometime - at that price level Zambia would have earned a substantial windfall to invest money into serious poverty reduction and infrastructure development.

    This is the time that we need to collect on the mines. When prices go back down, it's too late. This is a windfall for the mines that they didn't count on, so they shouldn't feel it when the state collects it as taxes.

    Also, the can't 'leave', because they can't take the mines with them. If they do leave, there are plenty of management companies that can administer and operate the mines on behalf of the government.

    Also, you cay incompetent, I say corrupt. That is why the government has put forward no rational argument that can stand up to scrutiny. It truly is daylight robbery. And it has to end.

    Do the PF still maintain that the windfall tax is a bad thing?

    ReplyDelete

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