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Monday, 21 November 2011

Where is the Windfall Tax?

Many people were demanding that the Zambian people should benefit from the country’s mineral wealth. They were expecting the PF Government to adequately tax the Mining Sector to generate financial resources in order to provide better roads, schools, hospitals and other infrastructure. The people were calling for the re-introduction of windfall tax on copper revenue. With copper prices remaining above US$7,000 per tonne, the mines are still gaining unexpected income which is above the planned threshold of US$2,500 to US$3,000 per tonne to make profit. The PF campaigned on the platform of re-introducing the windfall tax. What has changed?
From UPND's assessment of  Budget 2012. You can read the rest here

16 comments:

  1. Unless we get a windfall tax that taxes the mines to the tune of $1.3 billion a year, which is what they have been owing the Zambian taxpayers since at least 2006, every year, you are left with only one conclusion.

    That it doesn't matter who you vote into office, the foreign mining companies and the trillionair banking dynasties that own them rule the country.

    I want the PF to come out with a public statement why they suddenly became disinterested in the windfall tax.

    Hakainde Hichilema has now come out and criticized the PF for not introducing the windfall tax, but I want to know how he could succeed where others have failed.

    This is a matter of national sovereignty, national security, and economic development.

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  2. In a rather fanciful interpretation of the facts, former Finance Minister Situmbeko "The Cyclist" Musokotwane:

    In an interview, Dr Musokotwane said the PF had raised people's expectations beyond the party's ability to fulfill them.

    He said the PF government made a number of promises which Zambians would soon discover were lies.

    "Look at the issue of the windfall tax for example, I was called names, almost crusified that perhaps we were a corrupt regime, that perhaps we didn't have a heart for the Zambians when we said this was not a proper tax to introduce for the mining sector," Dr Musotwane said.

    "They PF accused us of so many things but here we are, have they reintroduced the windfall taxes on the mines? No! We also said there are other ways of looking at more revenue from the mines and we were studying that but they PF said they would not accept anything other than windfall tax. So these are some of the promises that Zambians are very mindful of."

    He said the PF won the elections on fake promises and this could cost the ruling party in 2016.

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  3. How does Zambia benefit from copper ?

    only a paltry $200 million from mineral tax

    the increase of minerals royalties to 6 percent from 3 percent for base metals such as copper, and to 6 percent from 5 percent for precious metals

    even former thieves bought and paid for by foreign mining companies would have increased it !

    the Veep said the grz will not re-introduce the windfall tax

    Now if the govt refuses to raise its stake in mines, Sata would dupe and betray the Zambian people within 90 days...

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  4. Hi MikeTe,

    I really want to know what the hell is going on. No one from the PF is talking (what else is new), and no one is saying why the mines won't be taxed effectively.

    I want to know what happens to these people when they enter office. Do they get a sit down talk with Evelyn de Rothschild, and get told they will be killed if they raise taxes?

    What is going on, who has been bought off, and when on earth is Zambia going to benefit from Zambia's resources?

    To the PF I say: start talking.

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  5. Welcome back MrK, welcome back Cho. I can see now that the silly season is finally coming to end ! Cho and MrK - MCS and the PF can be wrong at times and you are free to say so!

    Over the past few years I have enjoyed and have often used ZE as a starting point for research on Zambian economic issues. I have felt proud at the objectivity and standards of debate conducted on the Zambian Economist forum. This collection of articles and comments is rich beyond measure.

    I wasn't so sure about the objectivity displayed in the lead up to these last elections. But I believe it is an aberration that is now in the past.

    PF made fantastic promises and the chances of delivering on all of these promises is not high, in fact the chances are close to nil. (I suspect all the readers of ZE knew that right from the outset!).

    Getting back to the substantive issue, if PF are to keep only one promise- please let it be the Windfall Tax promise. I do not think it will be easy. The multinationals will not give in without a fight. Just last year the Australian Prime Minister Kevin Rudd was deposed because he dared cross BHP Billiton and Rio Tinto on the issue of the 'super tax'. It was naive for some people to have thought that PF could implement the windfall tax within 90 days! It will take longer , much longer to come to agreements that will have a better balance between the interests of the locals and those of the foreign investors

    What is disappointing is the statement by ABC suggesting that the Windfall Tax has not only been kicked into touch but will not be considered any time soon. My understanding is that the Windfall tax is the basis upon which the funding needed to deliver on the many promises. It is disappointing that the PF govt has resorted to incurring massive debt instead of collecting a fairer portion from the mines.

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  6. At least Situmbeko Musokotwane is a straight forward guy. What he tells you is what you get. He doesnt do smoke and mirrors! Honestly, there is need for our politicians to stop making populist promises they have not properly thought through.

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  7. Seb,

    At least Situmbeko Musokotwane is a straight forward guy.

    Not so hasty. :) I remember that Situmbeko "Bicycleman" Musokotwane was found with 1230 bicyles at his house, the number depending on the source.

    On the Windfall Tax, he has not spelled out exactly why " this was not a proper tax to introduce for the mining sector ".

    The mining sector is against, they are not against the 'variable profit tax' that they don't pay. And, the former Finance Minister also tried to sell the idea that income tax somehow is also 'taxing the mines'.

    So no, I am not about to get lectured on ethics by former MMD ministers.

    What I want to know is what the process was, which made the PF take the Windfall Tax 'off the table'.

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  8. It is interesting to note how easily we forget. The article on "prominent Zambians for Windfall Tax" made interesting reading. One wonders how Bob Sichinga and the other PF notables like Chenda have been conspicuously swallowed by collective responsibility. One would have thought Bob could be a major contributor to PF policy matters. We all appreciate their individual stances on windfall tax before the PF victory and we can therefore not fail to notice the vacuums created by the absence of their strong voices. Please follow the link below to see what Zambia's cream consultants (Prof. Oliver Saasa included) said about the subject. It is not fair to leave us wondering what has changed or which stronger voice was deliberately quiet in the run-up to the elections only to come and carry the day after the PF victory. http://www.zambian-economist.com/2010/11/coalition-for-windfall-tax.html

    ReplyDelete
  9. Hello Hello,

    Excellent link. Especially the words of Robert Sichinga are puzzling:

    “Why would any patriotic citizen or leader stop that windfall tax? That issue is so crucial such that the civil society and ordinary citizens will continue to argue they must impose that tax...I am also urging Parliament to reintroduce this topic and even if they get defeated, they must ask for a division and we must know which people are supporting the government over this failed and imprudent manner of taxing the mines. They should be named during the campaigns that these are the people who refused to have taxes imposed on the mines and let them go to the Copperbelt and campaign on that basis.”

    - Bob Sichinga (Economic Consultant)


    So what is going on? I have mailed Rolf Shenton, maybe he knows what is going on within the PF.

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  10. MrK,
    Can you tell me me which law Musokotwane has broken by having stored those bicycles at his farm? Has he been charged with a crime? Mrk, tell me how untruthful he has been on the issue of 'your bicycles'? Stick to the issue Sir i.e windfall tax! I repeat Musokotwane said it was not going to be introduced! Punkt! So you cannot fault him on that!

    MrK be honest with yourself. Musokotwane and other MMD Ministers did tell you why they didnt want to have a windfall tax. The reasons ranged from 1. its perceived unfairness (a sound reason ideologically which as a pseudo socialist you will obviously disagree with). 2. Musokotwane and his friends also told you that it was going to discourage further investment in the mining sector. 3. Musokotwane also told you that the tax holidays which were earlier given to the mining companies were soon to expire and that all mining companies were soon to start paying all legislated taxes. And because of this he expected increased govt revenue from the mining sector! All this stuff is there. I would just advise you to learn to listen to all politicians even those you hate!

    Finally, check the recent comments in parliament by Finance Minister A B Chikwanda. The man was praising the MMD govt for not introducing the Windfall tax as it was detrimental to the developmnent of the mining industry!

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  11. Hi its so disturbing, as a citizen of zambia i hve no one to trus,because if i remember well during campaigns the Pf used th ewindfall tax as one of the tool for their campaigns,now i wonder why there runing away from this issue,pliz some to make understand why we dont stick to what we say?
    concerned citizen

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  12. Robert Sichinga then (2010) and now (2011):

    From 2010:
    Refusing windfall tax is an injustice - Sardanis
    By Joe Kaunda and Chiwoyu Sinyangwe
    Fri 12 Nov. 2010, 04:01 CAT

    From 2011:
    Government has a challenge of creating 5.5 million jobs, says Sichinga
    By Misheck Wangwe in Kitwe
    Wed 23 Nov. 2011, 13:59 CAT

    2010: And Sichinga, who has described President Rupiah Banda and Dr Musokotwane as unpatriotic for opposing the reintroduction of windfall tax, has charged that despite increasing pleas for maximising revenue collections from the mining sector, the government has continued to be adamant and irresponsible.

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  13. 2010: "I am suggesting that if political parties were serious, they should make this a campaign issue," Sichinga said. "They should say to the people that we are failing to get development because your government is not serious about obtaining the benefits of our God-given endowment to your country. So, if I were in politics, that is exactly what I would be saying. I will be making this a campaign issue that ‘the government is irresponsible, not being patriotic and failing to do what is necessary'. Why tax you and I at 35 per cent and tax the mines almost nothing?"

    2011: And Sichinga says the government will not burden mines with taxes in order to give them more capacity for increasing jobs for Zambians.

    2011: He said 300,000 young people were offloaded on the job market annually and yet only 5,000 had an opportunity of being employed, leaving about 295,000 on the streets without jobs.

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  14. [If there are 58,000 people employed in mining, that means that every year, 5 x as many unemployed youths hit the streets than are employed in the entire mining industry. That means that even if employment in mining rose 2-fold, mining could not absorb even this year's new unemployed. And that is when copper prices are at record highs and lots of mines are open, which will not even last. And that means that the entire 'the mines are here to create jobs, not produce tax revenue' argument is bogus. - MrK]

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  15. 2010: "In our country, the mines have different costs of production but the maximum you can expect from even the ones with the lowest ore content is not to go beyond U$ 2, 000 per tonne," he explains. "That means they are making super profits between the US $2, 000 mark and the US $8, 000."

    2011: And during a tour of Kansanshi Mine in Solwezi on Sunday, Sichinga said the PF government wanted to create more wealth and jobs and hence would not pressure mining firms with inhibiting circumstances which might lead to stunted growth in job creation.

    2011: "We want to lower taxes so that the mining companies can work effectively," Sichinga told journalists at Kansanshi Mine after touring the firm's North West and South West open pit sites.

    ReplyDelete
  16. Hi MrK,

    FOR THE MOMENT I don’t think PF changes sides…

    They face the economic reality, PF won elections thanks young people polls, youth wants jobs which Banda didn’t be able to create

    So to not stop mining investments, they hesitate between increase of minerals royalties, windfall tax and raising stake in mines…

    Moreover you know mining plunderers, they make pression

    European debt crisis and credit crunch are going to spread abroad the world, they use these argues to scare the govt

    FQM has actually difficulties to negotiate for a facility for a further $1 billion to pursue kansanshi investment, Trident project and another ones…
    Vedanta wants to float KCM through KR (Konkola resources) to pursue Kdeep investment

    So the zambian plunderers don’t want scare investors… indeed FQM stock collapsed since sata elections

    and they blackmail the govt: investors scared, no money,no investment, no jobs whereas 5,5 million jobs must be created…

    to me, there is a deal, no frightening measure as long as funding of investments are not finished off…

    anyway the real will to make change about bad mining practises will be shown through 2 issues :
    # FQM owes zccm-ih $475 million and doesnt seem to be willing to pay its debt
    # Glencore (Mopani) swinddled hundred millions dollar (state lost an estimated income of USD 175 million in tax revenue between 2003 and 2008 and an estimated USD 50 million per year in undeclared dividends to ZCCM IH by Mopani). The govt must make an example by revoking mining licence…

    ReplyDelete

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